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Mr. Cooper (COOP) Rises 3% Since Q1 Earnings Beat: Growth Ahead?

Mr. Cooper Group Inc. COOP shares rose 2.9% since it reported strong first-quarter 2024 results on Apr 24, 2024. Solid growth in Servicing and Originations units were major tailwinds for the company. The servicing portfolio has reached the $1.1 trillion mark.

Investors also seem to be impressed with its focus on technological advancements. The implementation of the mortgage-centric AI platform named Pyro, which was developed in partnership with Google, is boosting efficiency and cost savings for the company. This is bound to provide it with a competitive advantage over its peers.

The company expects to onboard around $100 billion in unpaid principal balance in the June quarter, along with attracting more new clients. Its disciplined strategy to achieve targeted returns is inspiring confidence among investors in the stock.

Now, let's delve into the first-quarter results to gauge the company's operational performance.

Q1 Results

It reported first-quarter 2024 adjusted earnings per share (EPS) of $2.28, which beat the Zacks Consensus Estimate by 8.1%. The bottom line surged 94.9% year over year.


Mr. Cooper's total revenues jumped 70.9% year over year to $564 million. The top line beat the consensus mark by 13.2%.

Total expenses of $317 million rose 21.5% year over year due to increased salaries, wages and benefits and G&A costs. Interest income of $158 million jumped 85.9% year over year. Interest expenses increased 54.6% year over year to $170 million in the quarter under review.

Net income of $181 million in the first quarter surged from $37 million a year ago.

Segmental Performance

The Servicing segment reported a pretax operating income of $313 million, which rocketed 233% year over year in the first quarter due to portfolio growth and strong operating leverage. Total revenues of $450 million jumped from $231 million a year ago and beat the Zacks Consensus Estimate by 10.2%. The servicing portfolio increased 33% year over year, surpassing the $1.1 trillion mark.

The Originations segment witnessed 39.1% year-over-year growth in pretax operating income to $32 million. It maintained focus on cash-out purchase and second-lien products. For the second quarter, it expects pretax income to be in the $30-$40 million range.

Total revenues of $92 million in the first quarter rose from $80 million a year ago and beat the Zacks Consensus Estimate by 17.3%. Recapture percentage was at 23.9%, down from 24.3% a year ago, but beat the consensus estimate of 10.5%. Funded volume of almost $2.9 billion rose from $2.7 billion a year ago but missed the consensus mark by 8.2%.

Financial Position (as of Mar 31, 2024)

Mr. Cooper exited the first quarter with total assets of $14.8 billion, higher than $14.2 billion at 2023-end. Cash and cash equivalents amounted to $578 million, higher than $571 million at 2023-end.

Net unsecured senior notes were at $4.1 billion, up from $3.2 billion at 2023-end. Total liabilities of $10.4 billion at the first-quarter end were higher than $9.9 billion at 2023-end. Total shareholders’ equity rose from $4.3 billion at 2023-end to $4.4 billion.

Net operating cash flow of $28 million in the first quarter fell from $160 million a year ago.

Capital Deployment Update

The company bought back 0.5 million shares for $39 million in the quarter under review. At the first-quarter end, it had $98 million remaining in its repurchase program.

YTD Price Performance

Shares of COOP jumped 25.6% in the year-to-date period, outperforming the industry’s 8.6% growth and the S&P 500 Index’s 9.1% gain.

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Zacks Investment Research

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The company's strong price performance so far this year, coupled with its strategic position for growth, shareholder-value boosting efforts, management's disciplined approach and focus on technology, all indicate promising growth prospects ahead. These factors contribute to its current Zacks Rank #1 (Strong Buy), suggesting a lucrative investment opportunity for investors. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Finance Sector Releases

Here are some companies from the broader Finance space that have reported earnings for the March quarter: Discover Financial Services DFS, Ally Financial ALLY and Virtu Financial, Inc. VIRT.

Discover Financial reported first-quarter 2024 adjusted earnings per share of $1.10, which missed the Zacks Consensus Estimate by 63.1%. Its results were affected by escalating operating costs, feeble contributions from the Digital Banking segment and higher provision for credit losses. Nevertheless, the negatives were partially offset by receivables growth, deposit inflows and growing PULSE and Diners Club volumes.

Ally Financial reported first-quarter 2024 adjusted earnings of 45 cents per share, which surpassed the Zacks Consensus Estimate of 33 cents. Its results were supported by an improvement in other revenues. However, a decline in net financing revenues, along with higher expenses and provisions, partially offset the positives.

Virtu Financial reported first-quarter 2024 adjusted earnings per share of 76 cents, which outpaced the Zacks Consensus Estimate by 28.8% on the back of substantial growth in interest and dividends income, coupled with strong revenue contribution from the Market Making segment. However, the upside was partly offset by a decline in net trading income and an elevated overall expense level.

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