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Rocket Companies Dives 15% on Q2 Results, Despite Strong Growth

By Eric Volkman – Sep 3, 2020 at 5:09PM

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The top- and bottom-line improvements were largely expected, however.

Recent IPO Rocket Companies (RKT 2.29%), owner of the popular Rocket Mortgage and Quicken Loans businesses, disappointed investors with its first earnings report as a publicly traded enterprise. For the company's Q2 of fiscal 2020, reported after market close Wednesday, it booked just under $5.04 billion. This was a more than fivefold increase over the same quarter of last year.

That was on the back of loan originations that more than doubled over that stretch of time to hit a record $72 billion. Non-GAAP (adjusted) net income also ballooned, rising to $2.85 billion from the Q2 2019 result of $260 million.

House Sold sign and family.

Image source: Getty Images.

While these figures were significantly higher on a year-over-year basis, they were expected. Rocket Companies estimated roughly the same in a report on preliminary results it published last month.

In its official earnings release, Rocket Companies cited "unprecedented demand" as a major driver of its growth for the period.

The company proffered guidance for its current Q3, although it didn't provide top- or bottom-line estimates. It did say it expected closed loan volume to range from $82 billion to $85 billion for the quarter, more than double the Q3 2019 results. It also forecast that its gain on sale margins would be 4.05% to 4.30%, versus the 3.29% of the year-ago period.

It wasn't clear why investors traded the stock down so heavily on Thursday (it fell by over 15%). Company executives did warn, in a conference call discussing the results, that its business would soften in Q4 due to the seasonality of the mortgage sector. However, this dynamic is common throughout the industry.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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