Rocket Companies (RKT) Moves 10.0% Higher: Will This Strength Last?

Rocket Companies (RKT) shares rallied 10% in the last trading session to close at $13.86. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 6.3% loss over the past four weeks.

Shares of RKT have been surging for two consecutive trading sessions, fueled by a major acquisition announcement. On Monday, the company revealed plans to acquire Mr. Cooper Group COOP for $9.4 billion. The news triggered a wave of bullish sentiment among analysts. Deutsche Bank and KBW both upgraded their ratings on the mortgage lender, citing strong growth potential from the deal.

Deutsche Bank’s Mark DeVries raised his rating on RKT to Buy from Hold and increased his price target from $14 to $16. Meanwhile, KBW analyst Bose George upgraded the stock to Market Perform from Underperform. Both analysts believe the COOP acquisition will strengthen Rocket Companies’ market position and drive long-term growth.

This company is expected to post quarterly earnings of $0.05 per share in its upcoming report, which represents a year-over-year change of +25%. Revenues are expected to be $1.25 billion, down 9.6% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For Rocket Companies, the consensus EPS estimate for the quarter has been revised 11.3% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on RKT going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Rocket Companies is a member of the Zacks Financial - Mortgage & Related Services industry. One other stock in the same industry, Velocity Financial (VEL), finished the last trading session 0.9% lower at $18.45. VEL has returned -0.7% over the past month.

Velocity Financial's consensus EPS estimate for the upcoming report has changed +12.5% over the past month to $0.52. Compared to the company's year-ago EPS, this represents a change of +2%. Velocity Financial currently boasts a Zacks Rank of #1 (Strong Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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