Shares of the largest mortgage originator in the country, Rocket Companies (RKT -5.89%), traded nearly 4% higher as of 11:26 a.m. ET today after the company reported earnings results for the fourth quarter and full year of 2021.
Rocket reported earnings per share of $0.32 on total revenue of nearly $2.6 billion, missing estimates for EPS and revenue.
During the quarter, Rocket reported closed loan origination volume of $75.9 billion, which is down from the fourth quarter of 2020, but still up from the same period in 2019. Gain-on-sale margins slipped to 2.8%, as conditions in the mortgage market got more difficult.
In the current quarter, management is guiding for closed loan origination volume to continue to decline to between $52 billion to $57 billion, although CEO Jay Farner said guidance includes disruption from the omicron COVID-19 variant. Rocket also expects the gain-on-sale margins to improve in the current quarter to between 2.8% and 3.1%.
Rocket, which went public in the middle of 2020, has seen its stock more than cut in half since, as the refinancing boom during the pandemic cooled off and long-term interest rates, which mortgage rates track, have risen.
The mortgage market could continue to be difficult as the Federal Reserve raises its benchmark lending rate, potentially dampening buyer demand, and with a shortage of housing inventory in the U.S. The good news for Rocket is that margins seem to be stabilizing and the company did grow market share in 2021.
The company trades cheaply, so the downside may be limited, but I'm not overly confident in the stock or the industry as the Fed approaches its first potential rate hike in March.