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Why Rocket Companies' Stock Just Exploded 20% After Earnings

A mixture of incredible earnings and a large special dividend mark a great day for the Detroid-based technology-heavy holding company.

Credit | Fortune

Rocket Companies’ stock surged over 20% this Friday following a YoY revenue growth of 144%. A great fourth quarter earnings report and a high yield special dividend resulted in a rush of buying investors on the 26th.

Rocket is a Detroit-based holding company that owns tech-heavy real estate, mortgage, e-commerce and other financial services such as Rocket Mortgage, Homes, and Auto. The company went public in August 2020, raising a total of $1.8 billion, $1.5 billion short of their $3.3 billion target.

Shares fell at a decent rate following the company’s IPO, after a rise to $30 per share during last year’s September.

(correct ticker and chart above, although Stockdio hasn’t updated the name or logo yet)

The company’s Thursday after-hours report was incredibly standout, including a total year’s growth of over 200%. Analyst earnings and revenue estimates were beat significantly, with GAAP EPS of $1.09 and revenues of $4.78 billion. EPS estimates were at an average $0.87 per share.

Rocket Companies’ vice chairman and CEO Jay Farner said

“Rocket Companies’ record-breaking fourth quarter and full-year 2020 results demonstrate the sheer power of the technology platform we have built and refined for more than two decades.

On top of these great earnings and revenue beats, the company announced a special dividend of $1.11 per share, or just over 4% premarket. The company has said that they are “delighted to share (their) success with those who have supported our vision.

The company posted a 200%+ annual revenue growth, increasing its net income by 948%, from $754 million to over $2.8 billion.

Farner continued by saying

“In the midst of a pandemic, we successfully drove growth in every segment of our business, while never losing focus on meeting the needs of our team members, clients, and communities.” 

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The namesake major companies of Rocket Companies all thrived in 2020 due to a heightened stay-at-home audience, which helped buoy loaning and transactions between the holding’s subsidiaries.

Rocket Auto for example, sold 2,000 more units in Q4 2020 over Q4 2019. Amrock insurance saw a massive settlement revenue jump from $197.9 million to $448.2 million. Rocket Companies’ platforms in total generated a whopping 153 million unique visitors, a 61% YoY.

This boost really helped Rocket Companies’ stock, which has been very cheap for a while. The company traded at 3 times sales, and 6.24 times earnings premarket. As a reference, the S&P 500 P/E ratio is 35.3, or 5.7 times higher than Rocket Companies’.

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