Wells Fargo analyst Michael Kaye has maintained their neutral stance on PMT stock, giving a Hold rating on April 24.
Michael Kaye has given his Hold rating due to a combination of factors pertaining to PennyMac Mortgage’s current financial performance and future projections. The stability in the company’s book value per share (BVPS) and the potential improvement in run-rate earnings per share (EPS) from the previous quarter are positive indicators. Additionally, the issuance of $553 million in Credit Risk Transfer (CRT) term notes in the first quarter, with reduced spreads and extended maturities, suggests a solid financial maneuver by PennyMac Mortgage. Despite these positives, the core EPS fell short of expectations, primarily due to weaker-than-anticipated results in the interest rate-sensitive segment.
Moreover, while the run-rate earnings are currently below the dividend, management believes the dividend is secure for the time being, with a path toward improved earnings seen as feasible. This optimism is partly based on the potential benefits from a steepening yield curve. However, if the earnings run-rate does not enhance in the subsequent quarters, the sustainability of the dividend might be questioned. Kaye maintains an Equal Weight rating, suggesting that there are better opportunities within the coverage universe, and he anticipates the stock will continue to trade at a discount to book value due to the uncertain interest rate environment.
In another report released on April 24, KBW also assigned a Hold rating to the stock with a $14.50 price target.
PMT’s price has also changed moderately for the past six months – from $10.550 to $14.140, which is a 34.03% increase.
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PennyMac Mortgage (PMT) Company Description:
PennyMac Mortgage Investment Trust is a finance company, which invests primarily in residential mortgage loans and mortgage-related assets. It operates through following segments: Correspondent Production, Credit Sensitive Strategies, Interest Rate Sensitive Strategies, and Corporate Activities. The Correspondent Production segment deals with purchasing, pooling, and reselling newly originated prime credit quality mortgage loans either directly or in the form of mortgage-backed securities in capital markets. The Credit Sensitive Strategies segment includes investments in distressed mortgage loans, real estate acquired in settlement of mortgage loans, real estate held for investment, credit risk transfer agreements, non-agency subordinated bonds, and small balance commercial real estate mortgage loans. The Interest Rate Sensitive Strategies segment focuses on investments in mortgage servicing rights, excess servicing spread, agency and senior non-agency mortgage-backed securities, and the related interest rate hedging activities. The Corporate segment consists of certain interest income, management fee, and corporate expense amounts. The company was founded by Stanford L. Kurland on May 18, 2009 and is headquartered in Westlake Village, CA.
