As the Q3 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the thrifts & mortgage finance industry, including Walker & Dunlop (NYSE:WD) 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 14 thrifts & mortgage finance stocks we track reported a satisfactory Q3. As a group, revenues beat analysts’ consensus estimates by 5.6% while next quarter’s revenue guidance was 0.6% below.
In light of this news, share prices of the companies have held steady as they are up 3.6% on average since the latest earnings results.
Originating as a small mortgage banking firm during the Great Depression in 1937, Walker & Dunlop (NYSE:WD) provides commercial real estate financing, property sales, appraisal, and investment management services with a focus on multifamily properties.
Walker & Dunlop reported revenues of $337.7 million, up 15.5% year on year. This print exceeded analysts’ expectations by 3.5%. Despite the top-line beat, it was still a slower quarter for the company with a significant miss of analysts’ net interest income estimates and a narrow beat of analysts’ EPS estimates.
Walker & Dunlop Total Revenue
The stock is down 20.1% since reporting and currently trades at $63.87.
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 $82.76 million, up 23.6% year on year, outperforming analysts’ expectations by 4.9%. The business had an exceptional quarter with a beat of analysts’ EPS estimates and a solid beat of analysts’ revenue estimates.
Ellington Financial Total Revenue
However, the results were likely priced into the stock as it’s traded sideways since reporting. Shares currently sit at $13.73.
Founded in 1917 and rebranded from Washington Federal in 2023, WaFd (NASDAQ:WAFD) is a bank holding company that provides lending, deposit services, and insurance through its Washington Federal Bank subsidiary across eight western states.
WaFd Bank reported revenues of $187.2 million, flat year on year, falling short of analysts’ expectations by 2%. It was a disappointing quarter as it posted a significant miss of analysts’ net interest income estimates and a significant miss of analysts’ EPS estimates.
Interestingly, the stock is up 15.4% since the results and currently trades at $32.13.
Operating as a real estate investment trust since 1996 with a focus on generating income from interest rate spreads, Annaly Capital Management (NYSE:NLY) is a diversified capital manager that invests in agency mortgage-backed securities, residential mortgage loans, and mortgage servicing rights.
Annaly Capital Management reported revenues of $885.6 million, up 637% year on year. This result surpassed analysts’ expectations by 7.2%. More broadly, it was a mixed quarter as it also produced an impressive beat of analysts’ revenue estimates but a significant miss of analysts’ net interest income estimates.
Annaly Capital Management scored the fastest revenue growth among its peers. The stock is up 7.3% since reporting and currently trades at $22.85.
Founded during the Roaring Twenties in 1926 and headquartered in Fair Lawn, New Jersey, Columbia Financial (NASDAQ:CLBK) operates federally chartered savings banks in New Jersey that offer traditional banking services including loans, deposits, and insurance products.
Columbia Financial reported revenues of $64.91 million, up 29.4% year on year. This number beat analysts’ expectations by 15.5%. It was a very strong quarter as it also recorded an impressive beat of analysts’ revenue estimates and a beat of analysts’ EPS estimates.
The stock is up 18.3% since reporting and currently trades at $16.77.
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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