non-bank lender Mister Cooper Group (US: coop, After it reported first-quarter results last week that pleased market expectations, the stock price rose 4.3% in the days that followed.
The company, which operates primarily under the Mr. Cooper and Axom brands, reported adjusted earnings per share of $1.18, beating consensus expectations of approximately $1.06 per share.
The stock has continued its medium term track record of beating market expectations despite the ever-changing backdrop in the financing markets.
guidance is good
Total group revenue grew nearly 10% to $330 million, with total expenses falling from $292 million to $261 million, resulting in bottom-line net income growing from $1 million in 2022 to $37 million this year.
The servicing segment was the clear performer, generating strong adjusted earnings before tax of $157 million. That puts the company in a good position to achieve its guidance as profitability remains strong.
segment UPB value — the unpaid principal balance The portion of loans at a given time that have not yet been remitted to the lender – decreased 2% from last quarter to $853 million, driven by reducing balances in the subservicing portfolio.
Some Street analysts highlight that this segment is flourishing in the current environment, where borrowers are looking for better mortgage rate refinances where possible.
The Origination segment turned a $23 million profit from a pre-tax operating loss of $2 million last quarter, surprising many investment houses in the market.
Management indicated to investors that the segment benefited from an increase in mortgage rates at the end of the quarter, which boosted direct-to-consumer results. -$1.3 billion in consumer and reporter revenue.
The table below from Fintel’s Financial Metrics and Ratios page for COOP shows that cash generated from operating activities has declined in recent quarters but remains positive, showing healthy operating conditions.
CEO Jay Bray praised the company’s balanced business model and strong capital, liquidity and strong asset quality that positioned it well to capitalize on growth opportunities. He expressed optimism about the future, noting opportunities to grow its client base while focusing on positive operating leverage to generate higher returns.
Mr. Cooper has managed to maintain a strong financial position despite the pandemic, which positions him well for a post-pandemic recovery. The first quarter results show that the company has been able to maintain its strong financial performance in the face of challenging economic conditions.
traditional metrics down
When measuring management’s effective performance measures, we can see that traditional measures like ROE and ROIC are showing a decline in performance from highs in 2021.
However, on operating cash return on investor capital (OCROIC – Fintel Created Metric), we can see that management is continuing to generate healthy underlying returns.
COOP’s balanced business model and strong financial position, along with its focus on positive operating leverage, position it well to capitalize on future growth opportunities as the debt market continues to be volatile.
outperformed analyst expectations
Wedbush analyst Jay McCannless said COOP should continue to drive profitability over time as the servicing portfolio grows with increased efficiency. The analyst maintained his ‘outperform’ rating and $55 target price on the stock, noting that the increased size of the MSR hedge should help protect the group’s book value in the event of lower rates.
Shares gained 13% in the past month, closing April at $46.30 a piece.
Fintel consensus target price of $55.66 Analysts expect the stock to rise 20% this year if operations continue as planned.
This story originally appeared on Fintail,
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