Shares of the largest mortgage originator in the country, Rocket Companies (RKT -5.89%), were trading roughly 6.3% lower as of 10:33 a.m. ET today after the company reported earnings results for the second quarter of the year.
Rocket reported diluted earnings per share of just $0.02 on total revenue of nearly $1.4 billion, both of which missed estimates for the quarter. Earnings and revenue are also way down year over year.
Closed loan origination volume in the quarter came in at just $34.5 billion, down from $83.7 billion in the second quarter of 2021. The gain-on-sale margin of 2.92% did climb from 2.78% over the same period.
"As the mortgage market continues to transition, we are actively investing in our business and transforming the Rocket services and engagement platforms to better serve our clients," Rocket's CEO Jay Farner said in a statement.
He added: "In the second quarter alone, Rocket Companies introduced new lending programs, forged new mortgage partnerships, officially launched our solar business and expanded our brand deeper into Canada. These moves provide us immediate opportunities today, and a tremendous runway for growth and expansion well into the future."
With interest rates climbing in recent months, everyone knew it was going to be a difficult quarter for Rocket. The company cut costs by $300 million in Q2 and will be watching its costs very carefully in this difficult environment.
A strong jobs report this morning could mean the Federal Reserve has to keep hiking interest rates this year, which many expected anyway.
Rocket also gave poor guidance for the current third quarter, telling investors it expects closed loan origination volume between $23 billion and $28 billion and a gain-on-sale margin between 2.5% and 2.8%.
While Rocket could be the company to take a dominant share of the U.S. mortgage market, it's an incredibly tough time to be in the mortgage business, which is why I plan to stay on the sidelines for now.