Rocket Companies Earnings: Better-Than-Expected Results but High Mortgage Rates Remain a Issue

Narrow-moat-rated Rocket Companies reported better fourth-quarter results than we had expected, though the company continues to be affected by difficult mortgage market conditions industrywide. Revenue increased 44% from last year to $694 million, or $885 million when adjusted for a negative $191 million valuation change for the company’s mortgage servicing rights portfolio. Despite the recovery in revenue, the company still reported a net adjusted loss of $6 million, though this is a significant improvement from the $197 million loss last year. As we incorporate these results, we do not plan to materially alter our $13 fair value estimate for Rocket. We see the shares as undervalued on a full-cycle value, though we caution investors that near-term results will likely remain weak until mortgage market conditions improve.