As the craze of earnings season draws to a close, here’s a look back at some of the most exciting (and some less so) results from Q2. Today, we are looking at thrifts & mortgage finance stocks, starting with PennyMac Financial Services (NYSE: PFSI).

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 19 thrifts & mortgage finance stocks we track reported a slower Q2. As a group, revenues missed analysts’ consensus estimates by 26.9% while next quarter’s revenue guidance was in line.

In light of this news, share prices of the companies have held steady as they are up 1.2% on average since the latest earnings results.

PennyMac Financial Services (NYSE: PFSI)

Founded during the 2008 financial crisis to help address the mortgage market meltdown, PennyMac Financial Services (NYSE: PFSI) is a specialty financial services company that originates, services, and manages investments related to residential mortgage loans in the United States.

PennyMac Financial Services reported revenues of $444.7 million, down 7.1% year on year. This print fell short of analysts’ expectations by 19.8%, but it was still a strong quarter for the company with a beat of analysts’ EPS and net interest income estimates.

"PennyMac Financial once again delivered solid financial performance, showcasing our enduring strength and strategic agility in today's dynamic market landscape," said Chairman and CEO David Spector.

Interestingly, the stock is up 9.8% since reporting and currently trades at $114.57.

Is now the time to buy PennyMac Financial Services? Access our full analysis of the earnings results here, it’s free for active Edge members.

Best Q2: Ellington Financial (NYSE: EFC)

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 $92.54 million, up 1.5% year on year, outperforming analysts’ expectations by 11.5%. The business had a stunning quarter with a solid beat of analysts’ revenue estimates and an impressive beat of analysts’ tangible book value per share estimates.

The market seems happy with the results as the stock is up 7.2% since reporting. It currently trades at $13.58.

Is now the time to buy Ellington Financial? Access our full analysis of the earnings results here, it’s free for active Edge members.

Weakest Q2: Ready Capital (NYSE: RC)

Operating as one of only 17 non-bank Small Business Lending Companies with preferred lender status from the SBA, Ready Capital (NYSE: RC) is a multi-strategy real estate finance company that originates, acquires, and services commercial real estate loans, small business loans, and other real estate investments.

Ready Capital reported revenues of -$26.37 million, up 29.4% year on year, falling short of analysts’ expectations by 155%. It was a disappointing quarter as it posted a significant miss of analysts’ tangible book value per share and revenue estimates.

Ready Capital delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 16.8% since the results and currently trades at $3.53.

Read our full analysis of Ready Capital’s results here.

Two Harbors Investment (NYSE: TWO)

Operating in the complex world of mortgage finance since 2009, Two Harbors Investment (NYSE: TWO) is a real estate investment trust that invests in mortgage servicing rights and agency residential mortgage-backed securities.

Two Harbors Investment reported revenues of -$12.28 million, down 111% year on year. This number missed analysts’ expectations by 111%. It was a slower quarter as it also logged a significant miss of analysts’ revenue and EPS estimates.

The stock is down 4.9% since reporting and currently trades at $9.84.

Read our full, actionable report on Two Harbors Investment here, it’s free for active Edge members.

Starwood Property Trust (NYSE: STWD)

With a diverse portfolio spanning commercial properties, residential mortgages, infrastructure loans, and real estate servicing, Starwood Property Trust (NYSE: STWD) is a real estate investment trust that originates, acquires, and manages commercial mortgages, residential loans, and other real estate investments.

Starwood Property Trust reported revenues of $165.5 million, down 11.2% year on year. This result came in 20.4% below analysts' expectations. Overall, it was a slower quarter as it also produced a significant miss of analysts’ revenue and net interest income estimates.

The stock is down 3.8% since reporting and currently trades at $18.69.

Read our full, actionable report on Starwood Property Trust here, it’s free for active Edge members.

Market Update

Thanks to the Fed’s series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% in November), and a notable surge followed Donald Trump’s presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by potential trade policy changes and corporate tax discussions, which could impact business confidence and growth. The path forward holds both optimism and caution as new policies take shape.

Want to invest in winners with rock-solid fundamentals? Check out our Top 6 Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

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