Two Harbors Investment Q4 Earnings on the Deck: Here's What to Expect

Core Viewpoint - Two Harbors Investment Corp. (TWO) is set to report its fourth-quarter 2025 results on February 2, 2026, after market close, following a history of earnings misses and a recent acquisition agreement with UWM Holdings Corporation valued at $1.3 billion [1][3][9]. Financial Performance - In the last reported quarter, TWO posted earnings available for distribution per share of 36 cents, which was a 10% miss compared to the Zacks Consensus Estimate [1]. - The company has a weak earnings surprise history, missing the Zacks Consensus Estimate in all four trailing quarters with an average negative surprise of 13.34% [2]. - The Zacks Consensus Estimate for fourth-quarter earnings has remained unchanged at 30 cents per share, indicating a year-over-year increase of 50% [10]. Recent Developments - In December 2025, TWO entered into a definitive agreement to be acquired by UWM Holdings Corporation in an all-stock transaction worth $1.3 billion, which will add TWO's $176 billion mortgage servicing rights (MSR) portfolio to UWMC's operations [3][4]. - The acquisition is expected to create nearly $150 million in annual synergies and improve efficiencies in financing, hedging, and secondary market operations [3][4]. Market Conditions - The steady fixed-income markets are likely to have supported asset valuations and improved hedging effectiveness for TWO in the upcoming quarter [5]. - A positively sloped yield curve and a steepening yield curve during the quarter are expected to have contributed to an increase in TWO's book value per share [6]. - The Zacks Consensus Estimate for servicing income in Q4 is pegged at $151.4 million, down 9.1% from the previous quarter, while total interest income is estimated at $90.8 million, indicating a 3% decline from the prior quarter [7][8]. Interest Rates and Funding Costs - Since September 2025, the Federal Reserve has cut interest rates three times, including two reductions in the fourth quarter, which is expected to have lowered funding costs for TWO [9]. - The estimate for net interest income (NII) is pegged at negative $13 million, an improvement from negative $23.5 million reported in the prior quarter [10]. Earnings Prediction - The Zacks model does not predict an earnings beat for TWO this time, as the company lacks a positive Earnings ESP and holds a Zacks Rank of 5 (Strong Sell) [11][12].