As the Q2 earnings season wraps, let’s dig into this quarter’s best and worst performers in the thrifts & mortgage finance industry, including Two Harbors Investment (NYSE: TWO) and its peers.

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 18 thrifts & mortgage finance stocks we track reported a slower Q2. As a group, revenues missed analysts’ consensus estimates by 29.8% while next quarter’s revenue guidance was in line.

In light of this news, share prices of the companies have held steady as they are up 1.1% on average 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 revenues of -$12.28 million. This print fell short of analysts’ expectations. Overall, it was a slower quarter for the company with a significant miss of analysts’ EPS and tangible book value per share estimates.

“The combination of our investment portfolio and operating company allows us to be dynamic and responsive as opportunities emerge across the mortgage finance space,” said Bill Greenberg, TWO’s President and Chief Executive Officer.

Unsurprisingly, the stock is down 3.7% since reporting and currently trades at $9.97.

Read our full report on Two Harbors Investment here, it’s free.

Best Q2: 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 $92.54 million, up 1.5% year on year, outperforming analysts’ expectations by 11.5%. The business had a stunning quarter with an impressive beat of analysts’ tangible book value per share estimates and a solid beat of analysts’ EPS estimates.

The market seems content with the results as the stock is up 2.7% since reporting. It currently trades at $13.01.

Is now the time to buy Ellington Financial? Access our full analysis of the earnings results here, it’s free.

Weakest Q2: Franklin BSP Realty Trust (NYSE: FBRT)

Operating as a specialized real estate investment trust (REIT) with roots dating back to 2012, Franklin BSP Realty Trust (NYSE: FBRT) originates and manages a diversified portfolio of commercial real estate debt investments secured by properties in the United States and abroad.

Franklin BSP Realty Trust reported revenues of $50.78 million, up 171% year on year, falling short of analysts’ expectations by 8.9%. It was a disappointing quarter as it posted a significant miss of analysts’ net interest income and EPS estimates.

Interestingly, the stock is up 7.6% since the results and currently trades at $10.86.

Read our full analysis of Franklin BSP Realty Trust’s results here.

Ladder Capital (NYSE: LADR)

Founded during the 2008 financial crisis when traditional lenders retreated from commercial real estate, Ladder Capital (NYSE: LADR) is a real estate investment trust that originates commercial real estate loans, owns commercial properties, and invests in real estate securities.

Ladder Capital reported revenues of $56.3 million, down 21.4% year on year. This print was in line with analysts’ expectations. Zooming out, it was a softer quarter as it produced a significant miss of analysts’ tangible book value per share and net interest income estimates.

The stock is flat since reporting and currently trades at $11.10.

Read our full, actionable report on Ladder Capital here, it’s free.

Rocket Companies (NYSE: RKT)

Born in Detroit during the 1980s and evolving into a tech-driven financial powerhouse, Rocket Companies (NYSE: RKT) is a fintech company that provides digital mortgage lending, real estate services, and personal finance solutions through its technology platform.

Rocket Companies reported revenues of $1.36 billion, up 10.8% year on year. This number surpassed analysts’ expectations by 5.8%. Overall, it was a very strong quarter as it also recorded an impressive beat of analysts’ EPS and tangible book value per share estimates.

The stock is up 14.5% since reporting and currently trades at $16.91.

Read our full, actionable report on Rocket Companies here, it’s free.

Market Update

The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.

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