New Residential Investment Corps Earnings Estimate Grade
Estimate Revisions Grade:
Earnings estimate revision scores consider the magnitude of a companys earnings surprise in its last two reported fiscal quarters. Often, positive surprises beget further positive surprises-or at least continued sales growth Estimate revisions offer an indication of what analysts are thinking about the short-term prospects of a firm. Earnings estimate revisions are based on the statistical significance of a firms last two quarterly earnings surprises and the percentage change in its consensus estimate for the current fiscal year over the past month and past three months. New Residential Investment Corp has a Earnings Estimate Score of 36, which is Negative.
Servicing Is A Bigger Feature Of The Company Now
New Residential has a much larger focus on servicing mortgages. Mortgage servicing assets are interesting assets in that they are one of the few bond-type investments that increase in value as interest rates rise. Essentially, the mortgage servicer collects the monthly payment from the borrower and makes sure that the payment is routed to the investor, that the taxes and insurance are paid, and that any delinquencies are dealt with when borrowers stop paying. The servicer is then paid 0.25% of the loan’s balance per year for taking care of this. Ordinarily, this is a boring business.
Mortgage servicers were given an additional headache when the CARES Act mandated forbearance for pretty much anyone who asked for it. Since servicers are generally required to make up for any missed payments, they can find themselves with huge cash demands if delinquencies tick up dramatically. The government has at least placed a limit on advancement requirements, but it still affected the value of mortgage servicing rights. There was a period where Federal Housing Administration and Veterans Affairs servicing was more or less worthless.
New Residential Investment Corp Completes Acquisition Of Select Assets From Ditech Holding Corporation
NEW YORK—-New Residential Investment Corp. , a leading provider of capital and services to the mortgage and financial services industries, announced today that it has completed its acquisition of select assets from Ditech Holding Corporation and Ditech Financial LLC .
We have spent the last number of months preparing for the close of this acquisition and structuring a robust transition plan, said Michael Nierenberg, Chairman, Chief Executive Officer and President of New Residential. We are excited to execute on our plan and see tremendous potential for creating value across our business.
The approximate purchase price at the closing is $1.2 billion. New Residential is financing the acquisition of these assets with financing facilities and cash on hand.
As previously announced, New Residential will purchase Ditechs forward Fannie Mae, Ginnie Mae and non-agency mortgage servicing rights , with an aggregate unpaid principal balance of approximately $62 billion as of August 31, 2019, the servicer advance receivables relating to such MSRs and other assets core to the forward origination and servicing businesses. Additionally, New Residential will assume certain Ditech office spaces and add approximately 1,100 Ditech employees to support the increase in volume to its existing origination and servicing operations.
ABOUT NEW RESIDENTIAL
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
New Residential Investor Relations
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Is The Market Valuing This Mortgage Originator Unfairly
Mortgage originators are having a banner year, and the market for mortgage banking initial public offerings has been hot. We saw Rocket Companies go public in August through a normal offering and United Wholesale Mortgage prepare to go public this quarter via a special purpose acquisition company . The Mortgage Bankers Association forecasts that mortgage origination volume will hit $3.2 trillion this year, the highest since 2003.
Another mortgage company striking while the iron is hot is New Residential Investment . The company recently filed a confidential prospectus with the SEC to potentially spin off its mortgage and servicing arm. What does this mean for New Residential stockholders?
Origination Will Help But Can The Company Transition
The other number I want to see is origination volume. Almost every mortgage banker right now is inundated with loans, and profits are high. Will New Residential’s pivot into government-backed origination increase volumes? If so, then it should have steady cash flow that it can use to reduce debt, which is still on the low side at 1.5 to 1.7 times. Mortgage originators are hot right now, as Quicken readies its IPO and PennyMac Financial is firing on all cylinders.
New Residential is a complicated stock, and it might not be suitable for all investors. The dividend fell from $0.50 to $0.10, and periodic market shocks like we’ve seen during the pandemic can force companies to de-leverage their portfolios at the worst possible time. Investors should probably give this one some time to see how the new business model works out.
The Market Is Ignoring The Value Of The Origination Arm
On its third-quarter earnings conference call, New Residential laid out its case that the stock is undervalued. Here is the argument. New Residential is being valued as a typical mortgage REIT, which trades largely based on book value and its dividend. In the aftermath of the early 2020 mortgage meltdown, most mortgage REITs are trading at discounts to book value. The big agency REITs, like Annaly Capital Management and AGNC Investment, trade at 8% to 10% discounts to book value. New Residential trades at a 10% discount to book. While that may seem normal for a mortgage REIT, it is not normal for a mortgage originator. Mortgage originators do not trade based on book value, they trade on an earnings multiple. To use an extreme case, Rocket’s book value per share is around $3.22, and the stock trades at something like 6.3 times book. New Residential is making the case that the mortgage arm should be valued much higher than book.
New Residential argues the mortgage company should earn anywhere from $638 million to $674 million this year after taxes. Assigning the operating company a price-to-earnings multiple of five times to six times gives the mortgage and servicing arm a valuation of $5.58 to $7.66 per share. The non-banking operations have a book value of $10 per share, so if you add the two together, the entire company could be worth in the high teens.
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Latest New Residential Investment Corp Stock News
As of June 01, 2022, New Residential Investment Corp had a $5.3 billion market capitalization, compared to the REITs – Specialized median of $1508.3 billion, New Residential Investment Corps stock is up 5.7% in 2022, up 4.3% in the previous five trading days and up 5.5% in the past year. Currently, New Residential Investment Corps price-earnings ratio is 5.1. New Residential Investment Corps trailing 12-month revenue is $4.3 billion with a % profit margin. Year-over-year quarterly sales growth most recently was 92.3%. Analysts expect adjusted earnings to reach $1.450 per share for the current fiscal year. New Residential Investment Corp currently has a 8.8% dividend yield.Sign Up to Receive a Free Special Report That Shows How A+ Investor Grades Can Help You Make Investment Decisions
New Residential Investment Corp Announces Third Quarter 2021 Results
NEW YORK—-New Residential Investment Corp. today reported the following information for the third quarter ended September 30, 2021:
Third Quarter 2021 Financial Highlights:
- GAAP net income of $146.1 million, or $0.30 per diluted common share
- Core earnings of $209.9 million, or $0.44 per diluted common share
- Common dividend of $116.6 million, or $0.25 per common share
- Book value per common share of $11.35
- $1.4 billion of cash, for $1.9 billion of total liquidity
GAAP Net Income per Diluted Common Share
Core Earnings per Diluted Common Share
Our performance in the third quarter demonstrated the strength of our overall platform across complementary strategies, said Michael Nierenberg, Chairman, Chief Executive Officer and President of New Residential. Third quarter earnings were supported by the addition of the Caliber Home Loans, Inc. platform, strength in our investment portfolio, slowing MSR amortization and higher recapture. Over the last few years, we have evolved into a true asset creator, and, with the recently announced agreement to acquire Genesis Capital LLC, we plan to further our ability to create, retain and manage strong assets for our balance sheet. We believe our comprehensive strategy of combining investment management expertise with complementary operating companies will continue to drive earnings for our shareholders.
Third Quarter 2021 Company Highlights:
- Residential Securities and Call Rights
- Sold $4.5 billion of Agency securities
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Risk Factors Investors Need To Consider
A U.S. recession and a corresponding decline in interest rates are probably the two single biggest risk factors for investors that consider an investment in New Residential Investment Corp. at this point. A decline in interest rates would most likely negatively affect the REIT’s outsized MSR portfolio as borrowers have a higher incentive to refinance . As a result, the REIT’s dividend coverage stats could deteriorate. In any case, investors in high-yield income vehicles including New Residential Investment Corp. need to constantly monitor dividend coverage ratios in order to be able to react quickly to signs of deterioration.
New Residential Investment Corp
New Residential Investment Corp. is a mortgage REIT with an evolving investment platform. The mortgage REIT predominantly invests in mortgage servicing rights, servicer advances, residential securities, call rights and residential and consumer loans. Mortgage servicing rights are the single most important asset for New Residential Investment Corp., representing 51 percent of investments at the end of Q2-2018.
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New Residential Investment Corps Growth Grade
|EPS Dil Cont Growth Qtrly YoY||86|
|Operating Cash Growth Qtrly YoY||100|
|EPS Dil Cont Growth Rate 5yr||26|
|Operating Cash Growth Rate 5yr||91||38.8%||3.8%|
Growth investing builds on the idea that stocks of companies exhibiting strong, consistent and prolonged growth outperform those of slower-growth companies. AAII measures several dimensions of growth, including year-over-year increases in sales and earnings, long-term historical sales and earnings growth rates and analyst-forecasted long-term earnings growth. The components consider a companys success in growing its sales, earnings per share and operating cash on a year-over-year basis for the latest reported fiscal quarter and on an annualized basis over the last five years. High rates, especially compared to the sector median, lead to better scores. New Residential Investment Corp has a Growth Score of 79, which is Strong.
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It’s An Interesting Asset For This Reit That Increases In Price As Rates Rise
After experiencing one of the best years in over a decade, mortgage bankers are being treated as suspect by the market. Investors are fretting about rising mortgage rates choking off the refinance market, and increased competition among bankers suppressing margins. In this environment, a mortgage banker with several additional business lines like New Residential Investment can be a good way to navigate the current environment.
New Residential is officially a mortgage real estate investment trust and holds a $15.9 billion portfolio of mortgage-backed securities and residential whole loans. The company also owns $5.4 billion of mortgage servicing rights and is the largest nonbank owner of mortgage servicing rights.
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Moody’s Assigns Provisional Ratings To Prime Rmbs Issued By New Residential Mortgage Loan Trust 2022
Rating Action: Moody’s assigns provisional ratings to prime RMBS issued by New Residential Mortgage Loan Trust 2022-INV1Global Credit Research – 03 Mar 2022New York, March 03, 2022 — Moody’s Investors Service has assigned provisional ratings to 9 classes of residential mortgage-backed securities issued by New Residential Mortgage Loan Trust 2022-INV1 .NRMLT 2022-INV1 is the first securitization of 100% GSE eligible first-lien investment property mortgage loans sponsored by New Residential Investment Corp. in 2022, and the third overall issuance from the sponsor this year. Approximately 61.9% and 38.1 of the pool by loan balance is originated by Caliber Home Loans Inc. and NewRez LLC , respectively. Overall, the credit quality of the mortgage loans backing this transaction is in line with other transactions issued by other prime issuers.Servicing compensation is subject to a step-up incentive fee structure.
FORT WASHINGTON, Pa., March 03, 2022–Newrez and Patch have partnered to launch a homebuying mortgage resource hub for anyone going through the homebuying or refinancing process.
Investing In New Residential Investment Corp Stock
New Residential Investment Corp. is a provider of capital and services to the mortgage and financial services industry. Its portfolio is composed of mortgage servicing rights, mortgage origination and servicing companies , residential mortgage-backed securities, properties and loans, consumer loans, and other opportunistic investments. The Companys segments include Origination, Servicing, MSR Related Investments, Residential Securities, Properties and Loans, Consumer Loans, and Mortgage Loans. The Company’s investment portfolio includes servicing related investments, which includes operating entities, servicing related businesses, mortgage servicing rights and MSR financing receivables, excess MSRs residential securities, properties, and loans, which includes real estate securities , call rights, single-family rental properties, residential mortgage loans consumer loans, and mortgage loans receivable. Read on to learn how New Residential Investment Corp grades on certain key metrics to see whether it meets your investment needs.
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New Residential Changes Its Business Model
New Residential has historically been an originator of mortgages that do not fall within the government’s qualified mortgage safe harbor. These loans would have been called Alt-A back in the day, and they are typically used for investors who plan to rent out the properties or for self-employed borrowers who have high deductions and therefore earn more than their tax returns suggest. During the early days of COVID-19, the mortgage market seized up, and many of the mortgage real estate investment trusts were put in difficult positions with their counterparty lenders. Some, like New Residential, went as far as to completely change their business models. The company exited the non-QM lending business and decided to focus on plain-vanilla conforming lending .
A Wholesale Change Of Business Model
New Residential completely changed its business model during the months of April and May. The company was known for focusing on originating mortgages that cannot be guaranteed by the U.S. government. These loans are called non-qualified loans, and they are usually targeted to self-employed borrowers who have lots of tax deductions that understate the borrower’s actual ability to make the mortgage payments. During the month of April, non-QM loans fell 10 to 15 points, and New Residential decided to exit the business. It will still originate mortgages however, the company will focus on government-guaranteed mortgages. Since COVID-19, credit has tightened dramatically, and there simply isn’t much investor appetite for these loans.
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Other New Residential Investment Corp Grades
In addition to Growth, Estimate Revisions and Quality, A+ Investor also provides grades for Value and Momentum.
Momentum grades help uncover stocks experiencing anomalously high rates of return research finds that stocks with high relative levels of momentum tend to outperform, whereas those with low levels of momentum tend to continue underperforming. Successful stock investing involves buying low and selling high, so stock valuation is an important consideration for stock selection. Buying stocks that are going to go up typically means buying stocks that are undervalued in the first place, although momentum investors may argue that point. These 2 key factors, when combined with the above, provide a holistic view into a particular stock. Further, by joining A+ Investor you can see whether New Residential Investment Corps stock passes any of our 60+ stock screens that have outperformed the market since their creation.
Grading New Residential Investment Corp Stock
Stock evaluation requires access to huge amounts of data and the knowledge and time to sift through it all, making sense of financial ratios, reading income statements and analyzing recent stock movement. To help individual investors with that daunting task, AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels. AAIIs proprietary stock grades come with A+ Investor. These offer intuitive A-F grades for each of five key investing factors: value, growth, momentum, earnings revisions and quality. Here, well take a closer look at New Residential Investment Corp’s stock grades for value, growth and quality.
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Balance Sheet And Analyst Commentary:
New Residential also announced a $0.25 dividend for its common shareholders, for a current yield of 9.5%. It should be noted that the company has four series of preferred stock on which it paid dividends of $66.7 million in FY21. Book value per share was $11.44 on Dec. 31, 2021, up from $10.87 at YE20. Total liquidity at YE 21 stood at $1.4 billion.
Street analysts are bullish on the company’s prospects, featuring one buy and seven outperform ratings vs. one hold and a twelve-month price objective of $12.50. They expect the REIT to generate net income of $1.55 a share in FY22, followed by $1.75 a share in FY23, representing increases of 72% and 13%, respectively.
Although insider activity has been relatively slow with board member Robert McGinnis 4,000-share purchase of the Series D preferred in November 2021 the only activity in one year, New Residential stands out for its lack of insider selling, recording only one disposition since 2015.