Core Insights - The article focuses on analyzing Rithm Capital Corp.'s (RITM) recent performance and comparing it with 17 mortgage real estate investment trust (mREIT) peers, highlighting key metrics such as investment composition, leverage, hedging coverage ratio, and economic returns [1][2][3]. Investment Composition and Performance - As of March 31, 2025, RITM's investment portfolio consisted of 21% fixed-rate agency mortgage-backed securities (MBS), 0% variable-rate agency MBS, and 36% allocated to mortgage servicing rights (MSR) investments, with 43% in non-agency MBS and non-MBS holdings [17][18]. - RITM's book value (BV) per share decreased from $12.56 at the end of Q4 2024 to $12.39 at the end of Q1 2025, resulting in a quarterly BV decrease of 1.35% [20][21]. - Despite the minor BV decrease, RITM has managed to grow its BV over the past three years, outperforming most mREIT peers in terms of economic return [21][48]. Leverage and Hedging Coverage - RITM's on-balance sheet leverage ratio was 2.6x, with an at-risk (total) leverage ratio of 1.1x as of March 31, 2025, indicating a slight decrease in on-balance sheet leverage and a slight increase in at-risk leverage compared to the previous quarter [19][49]. - The hedging coverage ratio for RITM was geared towards lower mortgage interest rates, which helped mitigate BV volatility during periods of declining rates [50]. Economic Returns and Valuation - RITM's trailing 24-month economic return was 23.31%, significantly outperforming the average returns of its mREIT peers, which ranged from 2.43% to 20.02% across various classifications [48]. - As of June 6, 2025, RITM's stock price was trading at a 9.64% discount to the estimated current BV of $12.55 per share, suggesting that RITM is slightly undervalued compared to its peers [45][46]. Diversification and Investment Strategy - RITM's investment strategy includes a diverse array of financial investments, which provides natural hedges against market fluctuations, particularly in rising interest rate environments [25][26]. - The company has recently expanded its asset management services and diversified its investment portfolio through acquisitions, including Sculptor Capital Management [27][31].

Core Insights - Rithm Capital (NYSE: RITM) reported a mixed earnings scorecard for Q1'25, with a decline in the value of mortgage servicing rights negatively impacting the REIT's earnings [1] Group 1 - The change in the value of mortgage servicing rights was a significant headwind for Rithm Capital's earnings [1] - Despite the challenges, Rithm Capital was able to support its earnings [1]

Core Insights - The value of mortgage real estate investment trusts (REITs) like Rithm Capital Corp. (NYSE: RITM) is highlighted as a strong investment option amid market volatility, offering passive income through ultra-safe dividends and yields [1] Group 1 - Rithm Capital Corp. is positioned as a resilient investment choice for passive income investors [1] - The mortgage trust sector is noted for its ability to provide stability during uncertain market conditions [1]

Core Viewpoint - Rithm Capital Corp. (RITM) experienced a 12.2% increase in share price following the release of strong first-quarter results, driven by growth in core operating businesses despite declines in net servicing revenues and higher expenses [1] Financial Performance - Adjusted earnings for Q1 2025 were reported at 52 cents per share, exceeding the Zacks Consensus Estimate by 15.6% and reflecting an 8.3% year-over-year increase [1] - Total revenues for the quarter were approximately $768.4 million, representing a 39% year-over-year decline and missing the consensus mark by 31.8% [2] - Net servicing revenues fell to $28.9 million, a significant drop from $554.1 million in the prior-year quarter, missing the Zacks Consensus Estimate by 90.8% [3][5] - Interest income increased by 1.5% year over year to $441.3 million but fell short of the consensus estimate by 16.5% [3] - Gain on originated residential mortgage loans held for sale rose 12.2% year over year to $159.8 million, although it missed the consensus estimate by 8.4% [4] Expense and Income Analysis - Total expenses for the quarter were $928.1 million, up 9.1% year over year, driven by higher interest expenses and compensation costs [4] - Pretax income decreased significantly to $56.8 million from $380.9 million in the prior year [5] Segment Performance - In the Origination and Servicing segment, revenues decreased to $498.7 million from $1 billion year over year, with pretax income dropping to $90 million from $366.3 million [5] - The Investment Portfolio segment saw interest income decline to $71.8 million from $90 million a year ago, with total revenues decreasing to $105.1 million [6] - Residential Transitional Lending revenues increased to $66.5 million from $64.7 million, but pretax income fell to $15.9 million from $41.1 million [6] - Asset Management revenues rose to $97.1 million from $75.9 million, with a narrower pretax loss of $19.8 million compared to $29.7 million in the prior year [7] Financial Position - As of March 31, 2025, Rithm Capital had cash and cash equivalents of $1.5 billion, a 2.4% increase from the end of 2024 [8] - Total assets decreased to $45.3 billion from $46 billion at the end of 2024, while total equity remained stable at $7.9 billion [8] - Net cash provided by operations was $1.4 billion in Q1 2025, compared to net cash used in operations of $1.3 billion in the previous year [9] Capital Deployment - Rithm Capital did not engage in share buybacks during Q1 2025 but paid a quarterly common dividend of 25 cents per share, totaling $132.5 million [11]

Core Viewpoint - Banco Comercial Portugues S.A. Unsponsored ADR (BPCGY) is outperforming the Finance sector with a year-to-date return of 28.5% compared to the sector average of 5.6% [4] Company Performance - BPCGY has a Zacks Rank of 2 (Buy), indicating a favorable outlook based on earnings estimates and revisions [3] - The Zacks Consensus Estimate for BPCGY's full-year earnings has increased by 3.2% in the past quarter, reflecting improved analyst sentiment [4] - The stock belongs to the Banks - Foreign industry, which has an average year-to-date gain of 20.3%, positioning BPCGY above this average [6] Sector and Industry Context - The Finance sector, which includes 858 individual stocks, is ranked 6 in the Zacks Sector Rank [2] - Another stock in the Finance sector, Rithm (RITM), has a year-to-date return of 7.4% and also holds a Zacks Rank of 2 (Buy) [5] - Rithm is part of the Financial - Miscellaneous Services industry, currently ranked 144, which has seen a decline of 3.4% this year [7]

Group 1 - The focus is on growth and dividend income as a strategy for retirement planning [1] - The portfolio is structured to generate monthly dividend income that grows through reinvestment and annual increases [1] Group 2 - The article expresses personal opinions and is not intended as investment advice [2][3] - It emphasizes the importance of conducting individual research before making investment decisions [2]

Core Insights - The article emphasizes the importance of conducting personal in-depth research and due diligence before making investment decisions, highlighting the inherent risks involved in trading [3]. Company and Industry Summary - The analysis is intended solely for informational purposes and should not be interpreted as professional investment advice [3][4]. - There is a clear disclaimer regarding the lack of any stock or derivative positions in the companies mentioned, indicating a neutral stance from the analyst [2].

Financial Performance - The book value per common share decreased to $12.39 as of March 31, 2025, from $12.56 as of December 31, 2024, primarily due to a net income of $36.5 million and a dividend of $132.5 million for the three months ended March 31, 2025 [397]. - For the three months ended March 31, 2025, net income attributable to common stockholders was $36.5 million, a decrease of $226.7 million or approximately 86% compared to the prior quarter [509]. - Servicing revenue, net decreased by $1.1 billion to $28.9 million, primarily due to a $1.1 billion decrease in the fair value of the MSRs portfolio [512]. - Asset management revenues for the three months ended March 31, 2025, were $87.7 million, primarily driven by management fees and incentive income [499]. - Asset management revenues decreased by $171.2 million in Q1 2025 compared to the prior quarter, primarily due to the timing of incentive income crystallizations [524]. Economic Environment - The U.S. economy contracted by an annualized 0.3% in the first quarter of 2025, influenced by a surge in imports ahead of tariff impositions [399]. - The unemployment rate increased slightly to 4.2% in March 2025 from 4.1% in December 2024, with average payroll growth at 152,000 jobs per month in Q1 2025 [402]. - The nominal 10-year Treasury yield fell to 4.23% at the end of March 2025 from 4.58% in December 2024, reflecting lower real yields from Treasury Inflation Protected Securities (TIPS) [401]. - The 12-month increase in the overall Consumer Price Index (CPI) was 2.4% in March 2025, down from 2.9% in December 2024, signaling progress towards lower inflation [400]. - The overall economic outlook is uncertain due to changes in policies related to global trade, despite signs of labor market stability [399]. Company Operations - Rithm Capital's investment strategy includes exploring acquisitions and dispositions of assets, financing transactions, and other value-creating opportunities [395]. - The company operates through segments including Origination and Servicing, Investment Portfolio, Residential Transitional Lending, and Asset Management [407]. - The company has several wholly-owned subsidiaries providing various services in the mortgage and real estate sectors, enhancing its operational capabilities [440]. - The company has a multi-channel residential lending platform, providing a competitive advantage in originating both purchase and refinance loans across different market conditions [410]. Mortgage and Servicing Portfolio - As of March 31, 2025, Newrez serviced over 3.7 million customers with an aggregated unpaid principal balance (UPB) of approximately $786.6 billion, compared to $778.4 billion as of December 31, 2024 [410]. - The total servicing portfolio reached $844.9 billion UPB as of March 31, 2025, an increase of $1.0 billion from December 31, 2024 [412]. - The performing loan servicing division serviced $516.8 billion UPB of loans, while the special servicing division serviced $269.7 billion UPB of loans as of March 31, 2025 [412]. - The total UPB of MSRs and MSR financing receivables as of March 31, 2025, is $591.1 billion, with a carrying value of $10.1 billion [430]. - The delinquency rate for GSE loans is 0.3%, while the non-agency loans have a delinquency rate of 2.3% [432]. Financing and Liquidity - As of March 31, 2025, Rithm Capital had approximately $1.3 billion of available liquidity at NRM and Newrez, with $0.8 billion in excess of new regulatory liquidity requirements [541]. - Total outstanding debt obligations amounted to $32.5 billion as of March 31, 2025, including secured financing agreements and unsecured notes [545]. - Rithm Capital has margin exposure on $16.8 billion of secured financing agreements, which could significantly impact liquidity if collateral values decline [546]. - The total borrowing capacity under secured financing arrangements was $25.5 billion, with $11.6 billion of available financing [557]. - The company expects its cash on hand, cash flow from operations, and ability to refinance secured financing agreements to meet liquidity needs for the next 12 months [559]. Dividends and Shareholder Returns - Preferred dividends declared for the quarter ended March 31, 2025, were $27.3 million [567]. - Common dividends declared for the three months ended March 31, 2025, were $132.5 million [571]. Loan Origination and Performance - The origination business funded $11.8 billion in mortgages for the three months ended March 31, 2025, down from $17.3 billion in the prior quarter [418]. - Funded loan origination volume for Q1 2025 was $11.8 billion, down from $17.3 billion in the prior quarter, with refinance volume at 27.0%, down from 28.9% [519]. - Gain on originated residential mortgage loans as a percentage of pull through adjusted lock volume increased to 1.23% in Q1 2025, compared to 1.14% in the prior quarter [519]. - Refinance originations comprised 27.0% of funded loans for the three months ended March 31, 2025, down from 28.9% in the prior quarter due to lower refinance activity as interest rates remained elevated [417].

Group 1 - Rithm (RITM) is a stock that has shown better year-to-date performance compared to its Finance sector peers, returning approximately 1.3% against the sector average of 0.8% [4] - The Zacks Rank system indicates that Rithm has a current rank of 2 (Buy), reflecting a positive earnings outlook with a 4.2% increase in the consensus estimate for full-year earnings over the past three months [3] - Rithm belongs to the Financial - Miscellaneous Services industry, which has underperformed with an average loss of 12% year-to-date, further highlighting Rithm's relative strength [6] Group 2 - Banco Comercial Portugues S.A. Unsponsored ADR (BPCGY) is another Finance stock that has outperformed the sector, with a year-to-date return of 23% and a Zacks Rank of 2 (Buy) [4][5] - The Banks - Foreign industry, to which Banco Comercial Portugues belongs, has performed well with a 14.5% increase year-to-date, ranking 16 among industries [7]

Financial Data and Key Metrics Changes - Earnings available for distribution (EAD) was $0.52 per diluted share, representing an 8% year-over-year growth, marking the 22nd consecutive quarter where EAD exceeded common dividends paid [17] - GAAP net income was $36.5 million or $0.07 per diluted share, with a 2% return on equity [17] - Book value at the end of the quarter was $12.39, with the company trading at $10.40, indicating that equity is perceived as severely undervalued [19][30] Business Line Data and Key Metrics Changes - Genesis Capital produced nearly $1 billion in production, reflecting a 7% increase year-over-year [20] - Sculptor's asset management business reported $35 billion of assets under management (AUM) with $1.4 billion of gross inflows across the platform [21] - Newrez, as the third-largest servicer and fifth-largest originator, had a funded volume of just under $12 billion, generating $270 million of pre-tax income [23][43] Market Data and Key Metrics Changes - The company has over $80 billion of assets under management, with significant growth in various sectors including real estate, credit, energy, and infrastructure [15][16] - The servicing portfolio at Newrez is approximately $850 billion, which includes $509 billion of owned mortgage servicing rights (MSRs) [47] Company Strategy and Development Direction - The company aims to grow off-balance sheet capital and expand investment verticals, including energy transition and infrastructure funds [26][27] - There is a focus on building partnerships with limited partners (LPs) to enhance capital raising efforts and improve overall business performance [27][73] - The company is exploring various capital actions to unlock shareholder value, including potential public listings and restructuring [59][113] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating market volatility, emphasizing the importance of performance and risk management [6][7] - The outlook for the asset management business remains positive, with expectations of continued inflows and strong performance across various funds [37][80] - Management is optimistic about the potential for acquisitions in both the mortgage and asset management sectors, particularly in light of lower valuations in the current market [68][69] Other Important Information - The company is rolling out MSR funds, which are expected to attract significant demand in the marketplace [12][85] - The SPAC initiative aims to generate asset management fees and create off-balance sheet investment opportunities [40][108] Q&A Session Summary Question: Update on the Cooper Rocket transaction and its impact on Newrez - Management indicated that it would be business as usual for Newrez, with potential opportunities for subservicing arising from the transaction [56] Question: Thoughts on potential acquisition opportunities - Management confirmed an active M&A pipeline, particularly in the mortgage and asset management spaces, with a focus on scaling the credit business [68][69] Question: Fundraising activity and LP appetite amid volatility - Management reported strong fundraising momentum and emphasized the importance of building relationships with LPs for future success [72][73] Question: Performance and returns at Sculptor - Management highlighted strong performance across the credit and real estate businesses, with significant commitments in the real estate fund [80][81] Question: Insights on the securitization market amid volatility - Management noted that the market remains open for deals, with opportunities arising from wider spreads [95][96] Question: Update on the SPAC vehicle and its strategic rationale - Management explained that the SPAC provides a low-cost option for generating asset management fees and deploying capital effectively [108] Question: Potential structural changes to unlock value - Management is exploring various options, including the possibility of transitioning to a C-Corp structure to enhance valuation [127][130]