Rocket Companies CEO on Q2 results: ‘our multiple should be higher’

Rocket Companies Inc (NYSE: RKT) reported weaker than expected quarterly results on Thursday. The stock jumped more than 10% after reporting earnings but have given up about half of the gain since then.

Q2 financial performance and guidance for the third quarter

Rocket Companies valued its sales in the fiscal second quarter at $2.7 billion on 40 cents of per-share earnings. In comparison, analysts had called for $2.8 billion in sales on 46 cents of EPS. In the same quarter last year, the mortgage lender had posted a sharply higher $5.3 billion of sales.

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Rocket Companies has $4.4 billion in cash that is “largely held for investments, dividends, and share buybacks,” as per CFO Julie Booth.

For the fiscal third quarter, the Michigan-based firm’s guidance for closed loan volume and net rate lock volume topped FactSet consensus, and its outlook for gain-on-sale margins was in line with analysts’ estimates.

Highlights from CEO Jay Farner’s interview with CNBC’s “TechCheck”

On CNBC’s “TechCheck”, CEO Jay Farner expressed confidence that Rocket Homes will continue to be a prominent growth driver for the company in the future.

“Forsalebyowner.com, our centralised real estate services, the iBuyer programme, and our network of agents across the country have set us up to become the largest purchase retailer in the country in the next 24 months,” Farner said.

In the earnings release last week, CFO Booth said the stock was undervalued despite competitors in the mortgage space trading at a lower multiple. According to CEO Farner, however, Rocket Companies should be compared with fintech firms and eCommerce platforms.

“Our platform is clearly different from everyone else’s. Over time, investors will recognise that our multiple should be quite a bit higher,” he added.

Rocket Companies is on pace to have $600 billion in servicing by the end of 2020, which as per the chief executive, will result in $1.3 billion in cash. Rocket Auto has seen a three-fold increase in gross merchandise value over the past twelve months, and real estate transactions have jumped by 100% at Rocket Homes.