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PennyMac Mortgage (PMT)
NYSE:PMT

PennyMac Mortgage (PMT) AI Stock Analysis

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PennyMac Mortgage

(NYSE:PMT)

Rating:51Neutral
Price Target:
$12.50
▼(-0.64%Downside)
PennyMac Mortgage's overall stock score is influenced by financial challenges, including high leverage and negative cash flows, which are the most significant factors. Technical indicators and valuation provide moderate support, while recent corporate events show potential for improved liquidity. The balance of risks and opportunities results in an overall score indicating cautious optimism.
Positive Factors
Dividend Increase
There could also be a growing near-term case for the equity if it manages to raise the dividend to align with accretive returns from completing more private-label securitizations.
Earnings Performance
The stock rallied on good earnings results.
Securitization Activity
The company just issued its third securitization this year of Agency-eligible investor property loans, taking advantage of the relatively high guarantee fees being charged by the GSEs.
Negative Factors
Dividend Yield Comparison
The dividend yield at 12% remains lower than in the other REIT-servicers Annaly and Two Harbors.
Loan Default Risk
Default and severity rates tend to be higher for non-owner occupied loans, but the g-fee being charged by the Agencies is essentially too high relative to the risk outlook.
Origination Volume
Origination volume declined sequentially to $3.5 billion of correspondent loans acquired for PMT.

PennyMac Mortgage (PMT) vs. SPDR S&P 500 ETF (SPY)

PennyMac Mortgage Business Overview & Revenue Model

Company DescriptionPennyMac Mortgage Investment Trust, a specialty finance company, primarily invests in mortgage-related assets in the United States. The company's Credit Sensitive Strategies segment invests in credit risk transfer (CRT) agreements, CRT securities, distressed loans, real estate, and non-agency subordinated bonds. Its Interest Rate Sensitive Strategies segment engages in investing in mortgage servicing rights, excess servicing spreads, and agency and senior non-agency mortgage-backed securities (MBS), as well as related interest rate hedging activities. The company's Correspondent Production segment is involved in purchasing, pooling, and reselling newly originated prime credit residential loans directly or in the form of MBS. PNMAC Capital Management, LLC acts as the manager of PennyMac Mortgage Investment Trust. The company qualifies as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its shareholders. PennyMac Mortgage Investment Trust was founded in 2009 and is headquartered in Westlake Village, California.
How the Company Makes MoneyPennyMac Mortgage Investment Trust (PMT) generates revenue through several key streams. Primarily, the company earns money by investing in residential mortgage-backed securities (RMBS) and related mortgage assets, which provide interest income. PMT also gains from credit risk transfer investments, where it assumes a portion of the credit risk on specific mortgage loans in exchange for premium payments. Additionally, the company benefits from mortgage servicing rights (MSRs), which generate fee income from servicing and managing mortgage loans. PMT's business model is further supported by strategic partnerships and its ability to leverage market opportunities to optimize its investment portfolio, thereby enhancing its revenue potential.

PennyMac Mortgage Earnings Call Summary

Earnings Call Date:Apr 22, 2025
(Q1-2025)
|
% Change Since: -4.77%|
Next Earnings Date:Jul 30, 2025
Earnings Call Sentiment Neutral
The earnings call presented a balanced perspective with notable achievements in securitizations and risk management practices, but also highlighted significant challenges due to interest rate volatility and a net loss. The commitment to maintaining dividend stability and increasing retention in correspondent production were positive aspects, while declines in loan volume and MSR fair value were concerning.
Q1-2025 Updates
Positive Updates
Successful Securitizations
Completed three securitizations of investor loans totaling $1 billion in unpaid principal balance, retaining $94 million in new investments with returns on equity expected to be in the mid-teens.
Strong Risk Management
Diversified investment portfolio, efficient cost structure, and strong risk management practices, including interest rate hedging program and unique non-mark-to-market financing arrangements.
Dividend Stability
PMT declared a first quarter common dividend of $0.40 per share despite market challenges.
Increased Retention in Correspondent Production
PMT retained 21% of total conventional correspondent production in the first quarter, up from 19% in the fourth quarter.
Negative Updates
Net Loss Reported
PMT produced a net loss to common shareholders of $1 million or diluted earnings per share of negative $0.01.
Interest Rate Volatility Impact
Net fair value declines due to interest rate volatility and credit spread widening affected income.
Decline in Correspondent Loan Volume
Total correspondent loan acquisition volume was $23 billion in the first quarter, down 18% from the prior quarter.
Decrease in MSR Fair Value
Fair value declines on MSR investments were $56 million due to a decrease in mortgage rates driving an increase in future prepayment projections.
Company Guidance
During PennyMac Mortgage Investment Trust's first quarter 2025 earnings call, the company reported a net loss of $1 million to common shareholders, with diluted earnings per share at negative $0.01. Despite this loss, the company declared a common dividend of $0.40 per share for the first quarter. The book value per share as of March 31st was $15.43, a slight decline from the previous quarter. PMT emphasized its robust risk management practices, including interest rate hedging and non-mark-to-market financing arrangements, which helped navigate the volatile interest rate environment. The company's diversified investment strategy includes significant investments in mortgage servicing rights (MSRs) and credit risk transfer (CRT) transactions, which continue to perform well due to low expected prepayments and strong consumer credit strength. PMT successfully completed three securitizations totaling $1 billion in unpaid principal balance, retaining $94 million in new investments with expected returns on equity in the mid-teens. Looking forward, the company plans to maintain a consistent securitization cadence, aiming for one non-owner-occupied loan securitization per month and one jumbo loan securitization per quarter. The company's current run rate reflects a quarterly average of $0.35 per share, slightly down from the previous quarter, with potential for improvement if the yield curve steepens.

PennyMac Mortgage Financial Statement Overview

Summary
PennyMac Mortgage faces financial challenges with declining revenues, high leverage, and negative cash flows. Despite high gross profit margins, profitability is hindered by significant EBIT losses and high debt levels, potentially affecting financial stability.
Income Statement
45
Neutral
PennyMac Mortgage faced challenges in maintaining revenue stability, with a significant drop in total revenue to $406 million TTM from $725 million the previous year. The Gross Profit Margin is strong at 90.14%, indicating efficient cost management. However, the negative EBIT margin of -52.61% and the drop in net income to $123 million signal profitability issues. The EBITDA margin remains robust at 201.05%, showing good operational performance despite the earnings loss.
Balance Sheet
50
Neutral
The debt-to-equity ratio of 1.82 suggests a high level of leverage, which could pose risks in economic downturns. The equity ratio is relatively low at 12.79%, indicating limited reliance on equity financing. Return on Equity (ROE) is positive at 6.47%, reflecting some profitability. The company's high debt levels could affect future growth and financial stability.
Cash Flow
40
Negative
The cash flow analysis shows challenges, with a negative free cash flow of -$2.97 billion TTM. Operating cash flow is negative, indicating potential cash management issues. Both operating and free cash flow ratios to net income are concerning, suggesting the company is struggling to convert earnings into cash effectively. This could impact liquidity and operational flexibility.
Breakdown
TTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
406.06M14.72M725.87M103.11M82.84M108.63M
Gross Profit
366.05M1.94M603.76M25.55M-107.23M-119.97M
EBIT
-213.61M-3.67M558.23M47.89M44.66M79.73M
EBITDA
816.13M1.03B1.28B54.64M44.66M79.73M
Net Income Common Stockholders
123.06M160.98M199.65M-73.29M56.85M52.37M
Balance SheetCash, Cash Equivalents and Short-Term Investments
247.94M337.69M409.42M364.14M1.93B2.98B
Total Assets
14.88B14.41B13.11B13.92B13.77B11.52B
Total Debt
6.43B5.59B4.85B4.77B4.49B2.27B
Net Debt
5.09B4.14B10.19B3.33B2.73B-583.60M
Total Liabilities
12.97B12.47B11.16B11.96B11.41B9.22B
Stockholders Equity
1.90B1.94B1.96B1.96B2.37B2.30B
Cash FlowFree Cash Flow
-2.97B-2.73B1.33B1.78B-2.79B671.66M
Operating Cash Flow
-2.98B-2.73B1.34B1.78B-2.82B671.66M
Investing Cash Flow
629.83M1.36B-21.73M-1.87B1.09B-15.37M
Financing Cash Flow
2.00B1.43B-1.15B135.89M1.73B-702.64M

PennyMac Mortgage Technical Analysis

Technical Analysis Sentiment
Negative
Last Price12.58
Price Trends
50DMA
12.65
Negative
100DMA
13.12
Negative
200DMA
12.88
Negative
Market Momentum
MACD
-0.03
Negative
RSI
49.37
Neutral
STOCH
83.05
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PMT, the sentiment is Negative. The current price of 12.58 is above the 20-day moving average (MA) of 12.51, below the 50-day MA of 12.65, and below the 200-day MA of 12.88, indicating a neutral trend. The MACD of -0.03 indicates Negative momentum. The RSI at 49.37 is Neutral, neither overbought nor oversold. The STOCH value of 83.05 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for PMT.

PennyMac Mortgage Risk Analysis

PennyMac Mortgage disclosed 76 risk factors in its most recent earnings report. PennyMac Mortgage reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

PennyMac Mortgage Peers Comparison

Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
ARARI
66
Neutral
$1.36B0.41%10.18%-14.98%95.53%
EFEFC
65
Neutral
$1.22B9.339.59%12.12%11.91%52.26%
61
Neutral
$2.83B10.720.40%6.10%5.80%-21.26%
DXDX
60
Neutral
$1.32B15.886.01%16.59%73.74%-34.10%
TWTWO
53
Neutral
$1.12B5.060.63%16.67%-18.22%-114.40%
PMPMT
51
Neutral
$1.09B13.516.36%12.72%-4.42%-43.99%
ARARR
48
Neutral
$1.37B8.01-0.11%17.19%142.18%50.74%
* Real Estate Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
PMT
PennyMac Mortgage
12.58
0.28
2.28%
ARI
Apollo Real Estate
9.82
0.79
8.75%
ARR
ARMOUR Residential REIT
16.75
-0.02
-0.12%
DX
Dynex Capital
12.30
1.92
18.50%
EFC
Ellington Financial
12.87
2.11
19.61%
TWO
Two Harbors
10.80
-0.61
-5.35%

PennyMac Mortgage Corporate Events

Delistings and Listing ChangesPrivate Placements and Financing
PennyMac Mortgage Closes $105M Senior Notes Offering
Positive
Jun 10, 2025

On June 10, 2025, PennyMac Mortgage Investment Trust successfully closed a public offering of $105 million in 9.00% Senior Notes due 2030, including a partial exercise of an over-allotment option. The Notes, guaranteed by PennyMac Corp., are set to mature in 2030 and have been approved for listing on the New York Stock Exchange under the symbol ‘PMTW’. The offering, underwritten by major financial firms, is expected to generate net proceeds of approximately $101 million, which could increase if the remaining over-allotment option is exercised.

The most recent analyst rating on (PMT) stock is a Buy with a $15.50 price target. To see the full list of analyst forecasts on PennyMac Mortgage stock, see the PMT Stock Forecast page.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.