Let’s dig into the relative performance of PennyMac Financial Services (NYSE: PFSI) and its peers as we unravel the now-completed Q1 thrifts & mortgage finance earnings season.
Thrifts & Mortgage Finance institutions operate by accepting deposits and extending loans primarily for residential mortgages, earning revenue through interest rate spreads (difference between lending rates and borrowing costs) and origination fees. The industry benefits from demographic tailwinds as millennials enter prime homebuying age, technological advancements streamlining the loan approval process, and potential interest rate stabilization improving affordability. However, significant headwinds include net interest margin compression during rate volatility, increased competition from fintech disruptors offering digital-first experiences, mounting regulatory compliance costs, and potential housing market corrections that could impact loan portfolios and default rates.
The 22 thrifts & mortgage finance stocks we track reported a slower Q1. As a group, revenues missed analysts’ consensus estimates by 17.7%.
In light of this news, share prices of the companies have held steady as they are up 3.3% on average since the latest earnings results.
PennyMac Financial Services (NYSE: PFSI)
Founded during the 2008 financial crisis to help address the mortgage market meltdown, PennyMac Financial Services (NYSE: PFSI) is a specialty financial services company that originates, services, and manages investments related to residential mortgage loans in the United States.
PennyMac Financial Services reported revenues of $529.6 million, up 23.1% year on year. This print exceeded analysts’ expectations by 1.8%. Despite the top-line beat, it was still a slower quarter for the company with a miss of analysts’ tangible book value per share and EPS estimates.
“PMT produced strong levels of income excluding market-driven value changes in the first quarter,” said Chairman and CEO David Spector.
The market was likely pricing in the results, and the stock is flat since reporting. It currently trades at $100.94.
Is now the time to buy PennyMac Financial Services? Access our full analysis of the earnings results here, it’s free.
Best Q1: Northwest Bancshares (NASDAQ: NWBI)
Founded in 1896 and operating across Pennsylvania, New York, Ohio, and Indiana, Northwest Bancshares (NASDAQ: NWBI) is a bank holding company that operates Northwest Bank, providing personal and business banking, investment management, and trust services.
Northwest Bancshares reported revenues of $156.2 million, up 19% year on year, outperforming analysts’ expectations by 9.9%. The business had a stunning quarter with an impressive beat of analysts’ EPS and net interest income estimates.
The market seems happy with the results as the stock is up 14.3% since reporting. It currently trades at $13.50.
Is now the time to buy Northwest Bancshares? Access our full analysis of the earnings results here, it’s free.
Weakest Q1: Dynex Capital (NYSE: DX)
Operating in the financial markets since 1988 with a focus on capital preservation during economic turbulence, Dynex Capital (NYSE: DX) is a mortgage real estate investment trust that invests primarily in government-backed residential mortgage securities to generate income for shareholders.
Dynex Capital reported revenues of $17.13 million, up 637% year on year, falling short of analysts’ expectations by 22.4%. It was a disappointing quarter as it posted a significant miss of analysts’ EPS estimates.
Interestingly, the stock is up 1.5% since the results and currently trades at $12.66.
Read our full analysis of Dynex Capital’s results here.
Apollo Commercial Real Estate Finance (NYSE: ARI)
Launched during the aftermath of the 2008 financial crisis to capitalize on disruption in commercial real estate lending, Apollo Commercial Real Estate Finance (NYSE: ARI) is a real estate investment trust that originates and invests in commercial mortgage loans and other real estate debt.
Apollo Commercial Real Estate Finance reported revenues of $65.82 million, down 18.3% year on year. This number surpassed analysts’ expectations by 5%. It was a very strong quarter as it also logged a decent beat of analysts’ EPS estimates.
The stock is up 8.7% since reporting and currently trades at $9.87.
Read our full, actionable report on Apollo Commercial Real Estate Finance here, it’s free.
Franklin BSP Realty Trust (NYSE: FBRT)
Operating as a specialized real estate investment trust (REIT) with roots dating back to 2012, Franklin BSP Realty Trust (NYSE: FBRT) originates and manages a diversified portfolio of commercial real estate debt investments secured by properties in the United States and abroad.
Franklin BSP Realty Trust reported revenues of $52.01 million, up 1.8% year on year. This print came in 6% below analysts' expectations. It was a disappointing quarter as it also logged a significant miss of analysts’ EPS estimates.
The stock is down 2.9% since reporting and currently trades at $11.20.
Read our full, actionable report on Franklin BSP Realty Trust here, it’s free.
Market Update
As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.
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