What drove NEWT's consistent earnings beat in 2024?


Aime
NewtekOne Inc. (NEWT) achieved robust financial growth and surpassed earnings expectations in 2024, driven by several key factors:
- Strategic Business Model Transition: NewtekOne's transition from an internally managed non-diversified closed-end management investment company to a financial holding company has been instrumental in its growth. This strategic shift, which took place on January 6, 2023, involved significant changes in accounting and operational practices1. The company now operates Newtek Bank, a nationally chartered bank, providing a range of business and financial solutions to small and medium-sized businesses (SMBs)2.
- Diversified Loan Portfolio and Technology-Enabled Client Acquisition: NewtekOne's diversified loan portfolio, particularly its focus on technology-enabled client acquisition, has enhanced efficiency and customer satisfaction1. The company's proprietary technology, NewTracker, supports cost-effective business model by providing a user-friendly interface for interacting with their subject matter experts in areas like Banking, Lending, Payments, Technology, Payroll, and Insurance2.
- Growth in Interest Income and Noninterest Income: The company's net interest income has increased significantly, with a 36% rise over the same three-month period a year earlier3. Noninterest income has also contributed to the growth, with notable gains in servicing income, electronic payment processing income, and gains on sales of loans4.
- Effective Dividend and Capital Management: NewtekOne has declared a quarterly dividend of $0.19 per share, indicating a commitment to returning value to shareholders56. The company's successful private offering of senior unsecured notes in 2025 demonstrates its ability to manage capital effectively9.
- Strong Financial Performance and Profitability: The company's financial performance has been robust, with reported EPS of $0.38 for Q1 2024, surpassing the estimated $0.25, reflecting significant outperformance against forecasts1011. Net income achieved $9.7 million, exceeding the estimated $6.16 million for the quarter, indicating robust profitability11.
- Market Outperformance and Revenue Surprises: NewtekOne's revenue for the quarter ended December 2024, was $75.37 million, compared to the consensus estimate of $69.55 million, representing a year-over-year increase of 31%4. The reported revenue represents a surprise of +7.93% over the Zacks Consensus Estimate, with an EPS surprise of +4.55%4.
In conclusion, NewtekOne's consistent earnings beat in 2024 can be attributed to its strategic business model transition, diversified loan portfolio, growth in interest and noninterest income, effective dividend and capital management, strong financial performance, and market outperformance. These factors combined have driven the company's robust growth and profitability in the year.
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