PennyMac Q2 profit sinks 84% as higher rates reduce loan origination

Overview

• U.S. mortgage lender's Q2 adjusted pretax profit missed analyst expectations

• Net income for Q2 fell 84% yr/yr as higher rates weighed on results

• Company maintained quarterly dividend at $0.30 per share

Outlook

• Company expects adjusted ROEs to remain in high single digits through 2026 because of smaller projected origination market due to higher interest rates

Result Drivers

• HIGHER INTEREST RATES - Co said higher rates reduced origination volumes and weighed on profitability

• COST REDUCTION EFFORTS - Co is taking steps to realign its cost structure to improve profitability

• TECHNOLOGY INVESTMENTS - Ongoing investments in technology are streamlining production and lowering cost-to-produce, per CEO

Company press release: ID:nBw61wQP1a

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 5 "strong buy" or "buy", 4 "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the banks peer group is "buy"

• Wall Street's median 12-month price target for PennyMac Financial Services Inc is $105.50, about 23.1% above its July 28 closing price of $85.70

• The stock recently traded at 7 times the next 12-month earnings vs. a P/E of 7 three months ago

Reuters Recommended Reads

• July 28 - Redwood Trust Q2 net loss narrows sequentially, mortgage banking production doubles y/y

• July 28 - Rithm Capital Q2 profit falls

• July 29 - SoFi's unchanged profit forecast tempers record quarter, revenue outlook lift

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(This story was created using Reuters automation and AI based on LSEG and company data. It was checked and edited by a Reuters journalist prior to publication.)