Let’s dig into the relative performance of Two Harbors Investment (NYSE:TWO) and its peers as we unravel the now-completed Q1 thrifts & mortgage finance earnings season.
Thrifts & Mortgage Finance institutions operate by accepting deposits and extending loans primarily for residential mortgages, earning revenue through interest rate spreads (difference between lending rates and borrowing costs) and origination fees. The industry benefits from demographic tailwinds as millennials enter prime homebuying age, technological advancements streamlining the loan approval process, and potential interest rate stabilization improving affordability. However, significant headwinds include net interest margin compression during rate volatility, increased competition from fintech disruptors offering digital-first experiences, mounting regulatory compliance costs, and potential housing market corrections that could impact loan portfolios and default rates.
The 22 thrifts & mortgage finance stocks we track reported a slower Q1. As a group, revenues missed analysts’ consensus estimates by 18.5%.
While some thrifts & mortgage finance stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 1.5% since the latest earnings results.
Two Harbors Investment (NYSE:TWO)
Operating in the complex world of mortgage finance since 2009, Two Harbors Investment (NYSE:TWO) is a real estate investment trust that invests in mortgage servicing rights and agency residential mortgage-backed securities.
Two Harbors Investment reported weak revenues as the print fell short of analysts’ expectations. Overall, it was a softer quarter for the company with a significant miss of analysts’ EPS estimates.
“We delivered a strong first quarter, with both our securities and MSR contributing to positive performance,” said Bill Greenberg, TWO’s President and Chief Executive Officer.
Two Harbors Investment delivered the weakest performance against analyst estimates and slowest revenue growth of the whole group. Unsurprisingly, the stock is down 11% since reporting and currently trades at $10.67.
Read our full report on Two Harbors Investment here, it’s free.
Best Q1: Northwest Bancshares (NASDAQ:NWBI)
Founded in 1896 and operating across Pennsylvania, New York, Ohio, and Indiana, Northwest Bancshares (NASDAQ:NWBI) is a bank holding company that operates Northwest Bank, providing personal and business banking, investment management, and trust services.
Northwest Bancshares reported revenues of $156.2 million, up 19% year on year, outperforming analysts’ expectations by 9.9%. The business had a stunning quarter with a solid beat of analysts’ EPS and net interest income estimates.
The market seems content with the results as the stock is up 1.7% since reporting. It currently trades at $12.01.
Is now the time to buy Northwest Bancshares? Access our full analysis of the earnings results here, it’s free.
Weakest Q1: Dynex Capital (NYSE:DX)
Operating in the financial markets since 1988 with a focus on capital preservation during economic turbulence, Dynex Capital (NYSE:DX) is a mortgage real estate investment trust that invests primarily in government-backed residential mortgage securities to generate income for shareholders.
Dynex Capital reported revenues of $17.13 million, up 637% year on year, falling short of analysts’ expectations by 22.4%. It was a disappointing quarter as it posted a significant miss of analysts’ EPS estimates.
As expected, the stock is down 2.7% since the results and currently trades at $12.13.
Read our full analysis of Dynex Capital’s results here.
Ellington Financial (NYSE:EFC)
Operating under the guidance of Ellington Management Group, a respected name in structured credit markets, Ellington Financial (NYSE:EFC) acquires and manages a diverse portfolio of mortgage-related, consumer-related, and other financial assets to generate returns for investors.
Ellington Financial reported revenues of $82.91 million, up 9.8% year on year. This print surpassed analysts’ expectations by 20.7%. Overall, it was a strong quarter as it also produced a decent beat of analysts’ tangible book value per share estimates.
The stock is down 3.5% since reporting and currently trades at $12.78.
Read our full, actionable report on Ellington Financial here, it’s free.
Apollo Commercial Real Estate Finance (NYSE:ARI)
Launched during the aftermath of the 2008 financial crisis to capitalize on disruption in commercial real estate lending, Apollo Commercial Real Estate Finance (NYSE:ARI) is a real estate investment trust that originates and invests in commercial mortgage loans and other real estate debt.
Apollo Commercial Real Estate Finance reported revenues of $65.82 million, down 18.3% year on year. This result beat analysts’ expectations by 5%. It was a very strong quarter as it also logged a decent beat of analysts’ EPS estimates.
The stock is up 6.9% since reporting and currently trades at $9.71.
Read our full, actionable report on Apollo Commercial Real Estate Finance here, it’s free.
Market Update
Thanks to the Fed’s series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% in November), and a notable surge followed Donald Trump’s presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by potential trade policy changes and corporate tax discussions, which could impact business confidence and growth. The path forward holds both optimism and caution as new policies take shape.
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