Rithm Capital Q1 Earnings Beat Estimates, Stock Up 12.2%

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]