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Rocket Companies Surges on Earnings Beat

Shares of Rocket Companies jumped Friday as strong earnings and the announcement of a special dividend sparked a flurry of price target upgrades.

Shares of Rocket Companies  (RKT)  rose sharply Friday after the mortgage lender reported fourth-quarter earnings and revenue that exceeded Wall Street estimates.

Shares of the Detroit company, which went public in August, were rising 10.8% to $22.06 at last check during trading.

Rocket Cos. reported earnings of $1.09 a share, exceeding analyst consensus estimates of 87 cents a share. Revenue also topped forecasts at $4.78 billion. 

"Rocket Companies' record-breaking fourth quarter and full-year 2020 results demonstrate the sheer power of the technology platform we have built and refined for more than two decades," said Rocket's Vice-Chairman and CEO Jay Farner, in a statement.

Rocket completed a year of record mortgage volume and announced it would pay a special dividend of $1.11 a share. 

Analysts at JPMorgan  (JPM) said shares of Rocket will trade higher on the dividend news and positive earnings momentum.

Rocket also announced a new partnership with Morgan Stanley  (MS)  and eTrade to offer its clients conforming loan options.

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Jefferies analyst Ryan Carr called the quarter a “blowout,” with earnings, margins, origination volumes and efficiencies all better than expected.

"RKT has clearly demonstrated its ability to expand market share, even in purchase environments," Carr wrote, adding that "meanwhile, RKT has scaled profitability better than we had anticipated through this point."

Jefferies reiterated its buy rating and raised its price target on Rocket to $30 from $27.50, citing its strong guidance, the special dividend and powerful fundamentals.

Analysts at Barclays said that in the near term, "RKT remains the most heavily exposed to refinance volume out of our coverage universe and the stock continues to trade at a significant premium to peers." Barclays has an Equal Weight rating on the stock.

Morgan Stanley analyst James Faucette said the earnings report shows "significant profitability and dividends in a remarkable mortgage market."

Analysts at RBC said the real estate finance firm “delivered huge operating leverage, despite continued reinvestments, and suggests mortgage demand should continue into Q1.”

Bloomberg Intelligence analyst Ben Elliott said the gain-on-sale margin compression Rocket reported for the fourth quarter is “phenomenal."

Rocket operates tech-driven real estate, mortgage, and e-commerce businesses like Rocket Mortgage, Amrock, Rocket Homes and Rocket Auto.