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J.P. Morgan
Oct 30, 2026 · RKT
Tags: mortgages market-share expense-synergies MSRs
Value Score: 8/10
Core Conclusion: J.P. Morgan credits Rocket's market-share gains, margin mix and acquisition savings for a solid third quarter, but keeps Neutral because high mortgage rates constrain industry demand. The December-2027 target rises to $13 from $12.50 through a higher valuation multiple, even as 2027 and 2028 EPS forecasts fall. Better execution supports relative performance; it does not establish a broad origination recovery.
Adjusted earnings improve, while GAAP revenue includes a large valuation gain. Third-quarter adjusted EPS of $0.15 beat J.P. Morgan's $0.11 and consensus's $0.14. Adjusted revenue was $2.574bn versus the bank's $2.519bn. GAAP revenue of $3.284bn included a $710m gain from mortgage-servicing-right assumptions and related liabilities, net of hedges, excluded from adjusted revenue. That mark should not be treated as a matching improvement in origination activity (pp1,4).
Share and mix help despite softer direct-to-consumer locks. Purchase share approached 6.5%, up from 6.2%, while refinance share reached 15.5%, up from 14.3%. Total closed originations were $43.6bn and net rate locks $40.4bn. Excluding correspondent loans, gain-on-sale margin rose to 3.33% from 3.11%, supported by direct-to-consumer margins and more home-equity volume. Direct-to-consumer locks nevertheless fell to $22.1bn from $26.0bn sequentially. Higher share and better mix can coexist with lower absolute activity (pp1,3).
Acquisition savings are increasingly visible in expenses. Management reports $300m realized against a $400m annual Mr. Cooper synergy target and expects the target in the fourth quarter, a year early. The remaining $100m is annualized, with an estimated $25m fourth-quarter effect. Another $100m of annual savings is expected in the first half of 2027. Legacy Mr. Cooper recapture reached 60%, versus a 65% goal for end-2027 (p3).
Guidance calls for adjusted revenue of $2.1bn-$2.3bn, below the third quarter, while expenses excluding amortization, stock compensation and integration items are expected near $1.85bn, down about $165m. Cost reductions cushion the decline, but management's internal data suggest the fourth-quarter refinance market could shrink almost b
