Rocket Companies shares jump as it reports profit above $1 billion

Rocket Companies Inc. shares were on the rise in post-market trading Thursday, up more than 7% at one point, as the Detroit mortgage giant hit the lower end of its guidance for the second quarter.

The parent of Rocket Mortgage (formerly known as Quicken Loans) posted a $1.037 billion profit for the April-to-July quarter, a year-over-year decrease of 70% after homeowners took advantage of historically low interest rates over the past year.

But the country's largest mortgage lender grew its closed loan origination volume 15% to $83.76 billion, sitting between the $82.5 billion and $87.5 billion it had forecast. And although its gain-on-sale margin for the quarter fell to 2.78% from 5.19% a year ago, it was between the expected 2.65% and 2.95%.

Rocket CEO Jay Farner said during an earnings presentation that the company probably could have done better in its mortgage business as well as its Rocket Auto vehicle retail marketplace if more houses and cars were available: "Based on the strength of demand at the top of our funnel, we believe both record purchase volume and record auto results would have been higher if not for inventory challenges."

Rocket's shares on Thursday closed down 0.7%, to $17.48 per share, but the price in post-market trading was quickly climbing above its $18 initial public offering price from a year ago.

Despite the increased loan volume, revenue fell 47% to $2.669 billion in the second quarter. Expenses increased 3.7% to $1.608 billion. Diluted earnings per share was 40 cents.

Rocket is aiming to becoming the largest retail home purchase lender in the country by 2023. The second quarter proved it is on its way, Farner said, with record purchase closed loan origination volume that doubled from the year-ago period.

 The company expects to close more than $60 billion in purchase transactions by year's end.

So far this year, Rocket has grown its closed loan origination volume 51% to $187.3 billion, compared with a record of more than $320 billion for all of 2020. 

In the third quarter, Rocket forecast it will remain roughly steady with closed loan volumes between $82 billion and $87 billion and a gain-on-sale margin between 2.7% and 3%.

"The housing market remains active, homeowners are sitting on the highest level of equity in more than a decade, and the investments we have been making are gaining traction across the platform," Julie Booth, Rocket's chief financial officer, said during the presentation. "Our pipeline for both purchase and refinance remains robust."

An important piece in achieving those purchase goals is Rocket Homes, the company's Zillow-like digital real-estate platform, where homeowners can list to sell and buyers can connect with a real estate agent and search through listings. Average monthly visitors increased six-fold year-over-year to 2 million in the second quarter with the site contributing to $6 billion in homes sold and bought. Last month, listings in 50 states were made available on the site.

Rocket's direct-to-consumer businesses, which also include title insurance, appraisals and settlement services and the $500 million value it holds in servicing loans, contributed $1.435 billion, 56% less than a year ago. Its partner network, which includes wholesale business done through brokers, contributed $143 million, 78% less. It added about 100 brokers in the last 90 days, Farner said, to the more than 20,000 that have used the tools it provides to brokers.

But the direct-to-consumer channel "is really our lever to pull to influence our growth," he said. "We have a larger opportunity when we think about the direct-to-consumer and partner networks."

That's opposed to southeast Michigan rivals like Pontiac-based United Wholesale Mortgage Holdings Inc. and Ann Arbor's Home Point Capital Inc., which focus on business with brokers. Home Point reported a $73 million loss for the second quarter. UWM posts earnings on Monday.

Rocket also highlighted the $376.4 million income achieved from its other businesses. Rocket Auto, the company's automotive retail marketplace, for example, saw a 143% year-over-year increase in the number of vehicles it sold to 15,600. Merchandise value among a hot car market tripled for the quarter from a year ago to $484 million, reflecting the impact of a semiconductor shortage that has curbed auto production.

Amrock LLC, Rocket's title company, generated nearly 260,300 closings, an 8% increase year-over-year. Total liquidity sat at $7.8 billion. Of that, $2 billion is from cash on hand.

Last week, Rocket said it soon will use its platform to offer loans for solar panels and their installation. It also is offering $2,500 in closing cost credits for homebuyers in the city of Detroit, as well as other assistance.

"As today’s home market shift toward purchase in 2021," Farner said, "Rocket is geared to capture more purchase volumes driven by our superior technology-driven client experience, product innovation and our integrated end-to-end home buying ecosystem."

bnoble@detroitnews.com

Twitter: @BreanaCNoble