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New Residential BV should allay rate sensitivity fears - BTIG

Oct. 25, 2019 12:01 PM ETRithm Capital Corp. (RITM) StockRITMBy: Liz Kiesche, SA News Editor50 Comments
  • New Residential Investment's (NRZ +0.6%) "ability to protect book value in a volatile and falling rate environment is a positive development that should alleviate concerns about the company's interest rate sensitivity," writes BTIG analyst Giuliano Bologna in a note to client.
  • The company's hedging gains helped protect book value, which at $16.25 exceeded Bologna's estimate of $16.19.
  • Looking ahead, NRZ's acquisition of $1.2B of assets from Ditech, which closed early in Q4, should "drive incremental operating earnings and cash flow generation," Bologna says.
  • Notes that management targets ~$40B of origination volume in FY2020, up from $22B expected in FY2019.
  • "At a 12.8% dividend yield and a discount to book value, we believe NRZ shares continue to be undervalued," concludes Bologna, who rates the stock a buy with a price target of $18.00.
  • Sell-Side average rating is Outperform (3 Buy, 7 Outperform); average price target of $18.05.
  • Previously: New Residential book value rises despite rate volatility (Oct. 25)

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