Freddie Mac (OTCMKTS:FMCC) Releases Quarterly Earnings Results

Key Points

• Freddie Mac reported $0.01 in quarterly EPS, with net income rising 17% year over year to $3.2 billion and net revenue increasing 19% to $6.8 billion.
• Net worth grew 20% to nearly $81 billion, but credit-loss provisions jumped to $800 million as mortgage delinquencies increased and elevated rates pressured housing activity.
• The company faces a $98 billion regulatory-capital shortfall; analysts remain divided, resulting in an overall “Hold” rating and a $8.38 average price target.

Freddie Mac (OTCMKTS:FMCC - Get Free Report) issued its quarterly earnings results on Thursday. The company reported $0.01 earnings per share for the quarter, Zacks reports. Freddie Mac had a net margin of 9.58% and a negative return on equity of 90.29%.

Here are the key takeaways from Freddie Mac's conference call:

• Net income rose 17% year over year to $3.2 billion, while net revenues increased 19% to $6.8 billion, supported by higher net interest and non-interest income. Non-interest expense declined 6% due to efficiency and expense-discipline efforts.
• Freddie Mac’s net worth reached nearly $81 billion, up 20% year over year, and its mortgage portfolio grew 2% to nearly $3.7 trillion after providing $114 billion of housing-market liquidity.
• Credit costs increased sharply, with the provision for credit losses rising to $800 million from $175 million a year earlier. Higher projected mortgage rates extended expected loan lives, while single-family serious delinquencies rose to 61 basis points and multifamily delinquencies increased to 58 basis points.
• Elevated mortgage rates continued to weigh on housing activity, with multifamily new business volume falling to $16 billion from $25 billion a year earlier. Multifamily property prices also declined and cap rates increased, although the company said its shift toward fully guaranteed securitizations should make earnings more stable over time.
• Despite retained-earnings growth, Freddie Mac reported a $98 billion regulatory-capital shortfall excluding buffers, largely because $73 billion of senior preferred stock does not qualify as regulatory capital.

Freddie Mac Price Performance

Shares of Freddie Mac stock traded up $0.53 on Thursday, hitting $4.17. 3,442,037 shares of the company's stock traded hands, compared to its average volume of 2,784,613. The firm's 50-day moving average price is $4.44 and its two-hundred day moving average price is $5.86. The stock has a market capitalization of $2.71 billion, a PE ratio of 417.42 and a beta of 1.74. Freddie Mac has a one year low of $2.70 and a one year high of $11.80.

Analyst Ratings Changes

A number of research analysts have commented on the company. Keefe, Bruyette & Woods decreased their price objective on Freddie Mac from $6.50 to $3.50 and set an "underperform" rating on the stock in a research report on Monday, September 28th. Wedbush initiated coverage on Freddie Mac in a research note on Thursday, October 22nd. They set an "outperform" rating and a $6.00 price target on the stock. Finally, Mizuho set a $4.00 price target on Freddie Mac and gave the company a "neutral" rating in a report on Monday, October 12th. One analyst has rated the stock with a Buy rating, three have given a Hold rating and one has assigned a Sell rating to the company's stock. Based on data from MarketBeat, Freddie Mac currently has an average rating of "Hold" and an average target price of $8.38.

About Freddie Mac

Freddie Mac, formally known as the Federal Home Loan Mortgage Corporation, is a government-sponsored enterprise focused on supporting liquidity, stability and affordability in the U.S. housing market. It operates primarily in the secondary mortgage market rather than making most home loans directly to consumers.

The company purchases residential mortgage loans from approved lenders, providing those institutions with funds to make additional loans. Freddie Mac also pools eligible mortgages into securities that it guarantees and sells to investors.

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