Can Rithm Capital Navigate Lower Servicing Revenues in Q3 Earnings?

Core Viewpoint - Rithm Capital Corp. (RITM) is expected to report third-quarter 2024 results on October 29, 2024, with earnings estimated at 43 cents per share and revenues of $1.11 billion, indicating a year-over-year earnings decline of 25.9% but a revenue growth of 2.3% [1] Financial Estimates - The Zacks Consensus Estimate for Rithm Capital's revenues for the current year is $4.79 billion, reflecting a year-over-year increase of 32.2, while the EPS estimate is $1.81, indicating a decline of approximately 12.1% year-over-year [1] - Rithm Capital has consistently beaten consensus estimates in the last four quarters, with an average surprise of 36.3% [1] Earnings Prediction - The current model does not predict an earnings beat for Rithm Capital, as it has an Earnings ESP of -1.18% and a Zacks Rank of 4 (Sell) [2] Revenue Drivers - Revenue growth is expected to be supported by higher fees, interest income, and multiple acquisitions, with a favorable interest rate environment contributing to enhanced returns from specific investments and consumer loans [3] - The net gain on originated residential mortgage loans is projected to increase by 12.6% year-over-year, aided by the profitability of the Newrez business [4] Revenue Challenges - Despite expected revenue growth, net servicing revenues are projected to decline by 32.1% year-over-year, and asset management revenues are estimated at $85.1 million, down from $109.4 million sequentially [4] - High interest rates are likely to increase interest expenses and warehouse line fees, along with higher general and administrative expenses, which may impact profits and create uncertainty regarding an earnings beat [4] Stock Performance - Rithm Capital's stock has decreased by 1.2% year-to-date, underperforming the industry growth of 9%, while peers like Annaly Capital Management and AGNC Investment Corp. have seen slight gains [5] - The stock has significantly lagged behind the S&P 500, which has rallied by 21.5% during the same period [5]