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Rocket Companies (RKT)
NYSE:RKT
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Rocket Companies
(NYSE:RKT)
60Neutral
Positive Factors
Earnings
Shares up on better than expected 4Q results and 1Q outlook.
Market Share
Rocket Companies believes it is taking market share, with guidance pointing to stronger originations despite industry forecasts calling for a decline.
Negative Factors
Investor Sentiment
RKT shares are down 10% following the announcement; investors viewed the deal as complicating a clean rates/volume story.
Revenue Guidance
Revenue guidance for 1Q is below BofA and Street consensus.
Valuation
The current valuation at 24x consensus 2025e EPS is considered too rich.
Rocket Companies (RKT) vs. S&P 500 (SPY)
Market Cap
$26.31B
Dividend YieldN/A
Average Volume (3M)5.28M
Price to Earnings (P/E)78.3
Beta (1Y)1.79
Revenue Growth30.23%
EPS GrowthN/A
CountryUS
Employees14,200
SectorFinancial
Sector Strength77
IndustryBanking
Share Statistics
EPS (TTM)0.17
Shares Outstanding147,532,640
10 Day Avg. Volume9,308,443
30 Day Avg. Volume5,278,470
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)6.53
Price to Cash Flow (P/CF)-5.00
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$13.46Price Target Upside2.12% Upside
Rating ConsensusHold
Number of Analyst Covering13
Rocket Companies Business Overview & Revenue Model
Company DescriptionRocket Companies, Inc. is a personal finance company which helps its clients achieve the American dream of home ownership and financial freedom. Its flagship company, Rocket Mortgage, is the nation’s largest mortgage lender. The company’s other personal finance and consumer service brands include Rocket Homes, Rocket Loans, Rocket Auto, Amrock, Core Digital Media, Rock Connections, Rock Central, Lendesk and Edison Financial.
How the Company Makes MoneyRocket Companies generates revenue primarily through the origination of residential mortgages, with Rocket Mortgage being a significant contributor. The company earns money through the fees associated with originating and servicing loans, including interest rate spreads and origination fees. Additionally, Rocket Companies generates revenue from the sale of mortgages in the secondary market, which involves bundling and selling loans to investors. Ancillary revenue streams include services provided by Rocket Homes and Rocket Auto, which generate income through real estate and auto sales transactions. Strategic partnerships and technology platforms also play a role in enhancing Rocket Companies' service offerings and expanding its customer base.
Rocket Companies Financial Statement Overview
Summary
Rocket Companies exhibits a mixed financial performance. While recent revenue growth and reduced leverage are promising, the company faces challenges with operational profitability and cash flow generation. The high gross profit margin and improved equity position are strengths, but cash flow issues and historical volatility in earnings signal potential risks that need to be managed to ensure sustainable financial health.Income Statement
The income statement reveals a mixed performance. The TTM (Trailing-Twelve-Months) shows a significant recovery in revenue compared to the previous year, with a revenue growth rate of 33.44%. However, the company has experienced fluctuating net income, resulting in an unstable net profit margin. The gross profit margin remains high at approximately 98.86% for TTM, indicating efficient cost management. Despite these positives, the volatility in EBIT and negative EBITDA in previous years highlight operational challenges.45
Neutral
Balance Sheet
The balance sheet reflects a strengthened equity position with a debt-to-equity ratio effectively reduced to zero in the TTM, thanks to the elimination of total debt. The equity ratio is robust at 36.90% TTM, indicating a solid asset backing by stockholders' equity. However, previous years showed significant leverage, which poses historical risk concerns. The improved ROE of 7.71% TTM is a positive sign of profitability on equity.60
Neutral
Cash Flow
Cash flow analysis shows a concerning negative operating cash flow in the TTM, a significant drop from the positive cash flow in 2023. Free cash flow has also turned negative, marking a decline in cash-generating capability. The company's ability to convert operating cash flow to net income is currently adverse, indicating potential liquidity issues.40
Negative
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 5.10B | 3.61B | 5.68B | 12.68B | 15.55B | Gross Profit |
| 5.10B | 3.50B | 5.59B | 12.61B | 15.47B | EBIT |
| 3.38B | -294.87M | 160.92M | 420.95M | 330.33M | EBITDA |
| 465.38M | 67.35M | 0.00 | 0.00 | 0.00 | Net Income Common Stockholders |
| 29.37M | -15.51M | 699.93M | 6.07B | 9.40B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 1.27B | 1.14B | 722.29M | 2.13B | 1.97B | Total Assets |
| 24.51B | 19.23B | 20.08B | 32.77B | 37.53B | Total Debt |
| 5.34B | 9.56B | 8.71B | 19.26B | 21.95B | Net Debt |
| -1.27B | 8.43B | 7.98B | 17.13B | 19.98B | Total Liabilities |
| 15.47B | 10.93B | 11.61B | 23.02B | 29.65B | Stockholders Equity |
| 9.04B | 624.90M | 576.70M | 665.66M | 490.50M |
| Cash Flow | Free Cash Flow | |||
| -3.43B | 49.99M | 10.72B | 7.44B | -1.78B | Operating Cash Flow |
| -2.63B | 110.33M | 10.82B | 7.74B | -1.68B | Investing Cash Flow |
| -495.47M | 861.15M | 578.74M | -664.85M | 517.20M | Financing Cash Flow |
| 3.28B | -623.56M | -12.82B | -6.92B | 1.76B |
Rocket Companies Technical Analysis
Positive
13.18
Price Trends
12.50
Positive
13.47
Positive
15.11
Negative
Market Momentum
0.44
Positive
55.01
Neutral
26.89
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RKT, the sentiment is Positive. The current price of 13.18 is below the 20-day moving average (MA) of 13.55, above the 50-day MA of 12.50, and below the 200-day MA of 15.11, indicating a neutral trend. The MACD of 0.44 indicates Positive momentum. The RSI at 55.01 is Neutral, neither overbought nor oversold. The STOCH value of 26.89 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for RKT.
Rocket Companies Risk Analysis
Rocket Companies disclosed 66 risk factors in its most recent earnings report. Rocket Companies reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Rocket Companies Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
72 Outperform | $6.31B | 9.74 | 14.71% | ― | 22.89% | 39.00% | |
64 Neutral | $13.81B | 10.53 | 9.19% | 4.25% | 17.27% | -7.62% | |
62 Neutral | $4.97B | 16.56 | 8.45% | 1.14% | 42.36% | 110.48% | |
60 Neutral | $26.31B | 78.31 | 4.43% | ― | 30.23% | ― | |
58 Neutral | $1.23B | ― | 199.35% | ― | -4.16% | -17.19% | |
58 Neutral | $9.53B | 46.40 | 10.51% | 6.67% | 12.29% | ― | |
47 Neutral | $46.82M | ― | -83.20% | ― | -30.10% | 51.03% |
* Financial Sector Average
Performance Comparison
RKT
Rocket Companies
14.25
1.76
14.09%
PFSI
PennyMac Financial
95.98
10.20
11.89%
COOP
Mr Cooper Group
100.67
27.51
37.60%
RDFN
Redfin
10.38
3.26
45.79%
UWMC
UWM Holding
5.84
-0.68
-10.43%
OPAD
Offerpad Solutions
1.76
-6.52
-78.74%
Rocket Companies Earnings Call Summary
Earnings Call Date: Feb 27, 2025 | % Change Since: 2.73% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Positive
Rocket Companies demonstrated strong financial performance with significant revenue growth and operational improvements driven by technological advancements and innovative products. Despite market volatility and expected expense increases, the company's strategic investments and AI integration position it for continued growth.Highlights
Strong Revenue Growth
In Q4, Rocket Companies generated $1.2 billion in adjusted revenue, representing a 34% year-over-year growth. For the full-year 2024, adjusted revenue was $4.9 billion, a 30% increase from the previous year.
Significant Operating Leverage Improvement
The adjusted EBITDA margin grew to 18% in 2024, up from 2% the previous year, showcasing strong operational efficiency.
Innovative Product Launches
Rocket Companies launched products like ONE+, 1% down, and Welcome Home RateBreak, which doubled the volume of affordability products in 2024 compared to 2023.
AI Transformative Impact
AI-driven tools saved one million hours of team member time and resulted in $40 million in efficiency gains, with Rocket Logic transforming client service and underwriting processes.
Servicing Portfolio Growth
The servicing portfolio reached $593 billion in unpaid principal balance, a 17% increase, adding 308,000 new servicing clients.
Lowlights
Market Volatility Concerns
The macroeconomic environment remains uncertain with volatile rates and low home affordability impacting market conditions.
Expense Increases
Total expenses are expected to increase by $100 million year-over-year in Q1 2025 due to variable costs, marketing, and brand restage efforts.
Company Guidance
During Rocket Companies' fourth quarter and full-year 2024 earnings call, CEO Varun Krishna highlighted the company's strong financial performance and strategic initiatives. The company achieved $1.2 billion in adjusted revenue for Q4, marking a 34% year-over-year growth, and $4.9 billion in adjusted revenue for the full year, a 30% increase. Adjusted EPS for Q4 was $0.04, and $0.23 for the full year. Rocket Companies focused on efficiency, expanding its adjusted EBITDA margin to 18% from 2% the previous year. The company also increased its servicing portfolio to $593 billion in unpaid principal balance, a 17% rise, and added 308,000 new servicing clients, totaling 2.8 million. With strategic investments in AI, technology, and marketing, Rocket Companies aims to further enhance its market share and improve client experiences.Rocket Companies Corporate Events
M&A TransactionsBusiness Operations and Strategy
Rocket Companies Announces Up-C Collapse Restructuring Plan
Neutral
Mar 10, 2025
On March 9, 2025, Rocket Companies announced a significant restructuring plan known as the Up-C Collapse, which involves a series of mergers and reorganizations to streamline its corporate structure. This plan will consolidate voting power and economic rights, allowing public stockholders and key stakeholders like Mr. Gilbert to participate directly in the company’s economics through common stock ownership. The restructuring is expected to maintain Rocket Companies as a ‘controlled company’ under NYSE rules, with Mr. Gilbert retaining a majority of the voting power. Additionally, Rocket Companies has entered into a merger agreement to acquire Redfin Corporation, which is subject to various approvals and conditions. This acquisition aims to enhance Rocket’s market position and operational capabilities, although it carries potential risks and uncertainties related to integration and market reactions.
M&A TransactionsBusiness Operations and Strategy
Rocket Companies to Acquire Redfin in $1.75B Deal
Positive
Mar 10, 2025
On March 9, 2025, Rocket Companies announced an agreement to acquire Redfin in an all-stock transaction valued at $1.75 billion, with each Redfin share being exchanged for 0.7926 shares of Rocket’s Class A common stock. The merger aims to integrate Redfin’s real estate platform with Rocket’s mortgage services, enhancing the home-buying experience and driving growth in Rocket’s purchase mortgage market. The transaction is expected to close in the second or third quarter of 2025, pending shareholder approval and regulatory conditions. The merger is projected to generate significant synergies and be accretive to Rocket’s earnings by the end of 2026.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.