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Investments / The Ticker

Future remains bright for Redwood Trust

magnifying glass

There is still hope for Redwood Trust (RWT) despite it significantly missing analyst estimates in the first quarter.

The real estate investment trust reported net income of $12 million, or $0.14 per fully diluted share, less than half of expectations.

CEO, Martin Hughes, and president, Brett Nicholas, in a letter to shareholders remained opportunistic about the future.

"Over time, we expect that the mortgage market and interest rates will stabilize such that our earnings will more consistently reflect our operational progress each quarter and serve as a primary valuation metric for the company. But we are not there yet,” the letter stated.

But Hughes and Nicholas were not alone in this assertion.

A FBR report over Redwood Trust said that it continues to believe shares will remain range bound in the near term.

“That said, Redwood continues to be one of the only ways to play a return of private capital in the mortgage market, and we see significant upside to both earnings and dividends in the years to come even is the timeline is extended out,” FBR said.

Redwood is unlikely to securitize any meaningful amount of loans and expect any future securitizations to on the smaller side.

However, the report also noted, “We believe it is difficult to believe RWT will be able to generate revenues comparable to last year’s levels as ramping conforming and commercial businesses struggle to offset declining securitization volumes." 

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