PennyMac Financial Services Q3 adj. pretax profit beats estimates; expects mortgage demand to stay subdued

Overview

• U.S. mortgage lender's Q3 adjusted pretax profit beat analyst expectations

• Q3 net income fell sharply year-over-year

• Servicing segment profitable, production segment posted pretax loss amid industry contraction

• Kevin Ryan, currently Chief Strategy Officer, will be CFO from Jan 1

Outlook

• Company expects fourth-quarter adjusted ROE to remain near current levels

• Company expects mortgage demand to remain subdued due to higher interest rates

• Company expects annualized operating expenses to decline by $160 mln by Q1 2027

Result Drivers

• SERVICING PROFITABILITY - Co said servicing segment delivered strong profitability, offsetting weakness in production segment, per CEO David Spector

• COST REDUCTIONS - Co said it is implementing aggressive expense reductions in response to subdued mortgage demand and higher rates

• LOWER ORIGINATION VOLUMES - Co attributed production segment revenue declines to lower refinance volumes and a smaller, more competitive origination market

Company press release:

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 4 "strong buy" or "buy", 4 "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the banks peer group is "buy"

• Wall Street's median 12-month price target for PennyMac Financial Services, Inc. is $90.00, about 41.9% above its October 28 closing price of $63.42

• The stock recently traded at 7 times the next 12-month earnings vs. a P/E of 7 three months ago

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(This story was created using Reuters automation and AI based on LSEG and company data. It was checked and edited by a Reuters journalist prior to publication.)