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The Zacks REIT and Equity Trust Industry has reported subpar earnings for third-quarter 2023. Among the 12 companies that have reported so far, 33% failed to beat the Zacks Consensus Estimate, with 14 negative estimate revisions out of 17.
A hawkish Fed and the increasing probability of interest rates remaining high for a longer period continue to inject volatility in the mREITS market. The industry has fallen 19.86% over the past three months (as of Oct 31).
This has put mREITS ETFs such as VanEck Mortgage REIT Income ETF (MORT - Free Report) and iShares Mortgage Real Estate ETF (REM - Free Report) in focus.
Below, we highlight the Q3 results from companies belonging to the Zacks REIT and Equity Trust Industry.
On Oct 25, Annaly Capital reported second-quarter earnings available for distribution (EAD) per average share of 66 cents, which surpassed the Zacks Consensus Estimate of 65 cents. The bottom line declined from $1.06 in the year-ago quarter.
Net interest income (NII) was negative $45.33 million against the Zacks Consensus Estimate of $330 million, plunging year over year from $277.99 million.Annaly’s BVPS was $18.25 as of Sep 30, 2023, down 8.5% from $19.94 in the prior-year quarter.
According to Annaly’s management, Annaly had reduced leverage and significant liquidity, allowing them to maintain flexibility due to their adaptable hedging strategies. However, during the quarter, increased interest rates and spreads negatively impacted their book value and economic return, despite Annaly employing active portfolio management.
On Oct 30, AGNC Investment reported third-quarter 2023 net spread and dollar roll income per common share of 65 cents, which beat the Zacks Consensus Estimate of 57 cents. However, the bottom line declined from 84 in the prior-year quarter.
Adjusted net interest and dollar roll income of $499 million moved down about 2.9% from the quarter-ago levels. AGNC’s net interest income was negative $53 million against $177 million in the year-ago quarter. The Zacks Consensus Estimate was pegged at $310.2 million.
During the third quarter, the results were supported by increasing asset yields. To navigate the shift in monetary policy, the company has strategically positioned itself by making prudent asset selections and timely adjustments to its portfolio. Moving ahead, investments in agency MBS are expected to generate appealing risk-adjusted returns.
VanEck Mortgage REIT Income ETF seeks to track the performance of the MVIS US Mortgage REITs Index with a basket of 25 securities. The fund has gathered an asset base of $178 million and charges an annual fee of 0.41%. MORT has a high dividend yield of 15.6%.
VanEck Mortgage REIT Income ETF has exposure of 11.31% and 6.93% in NLY and AGNC, respectively. The fund has lost about 16.90% over the past month. However, MORT has added around 4.11% since Oct 26 (as of Oct 31).
iShares Mortgage Real Estate ETF seeks to track the performance of the FTSE NAREIT All Mortgage Capped Index with a basket of 32 securities. The fund has gathered an asset base of $498.3 million and charges an annual fee of 0.48%. REM has a high dividend yield of 11.9%.
iShares Mortgage Real Estate ETF has exposure of 15.56% and 8.62% in NLY and AGNC, respectively. The fund has 17.22% over the past month but has added about 5.05% since Oct 26 (as of Oct 31).
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What Do Mortgage REIT Earnings Hold for ETFs?
The Zacks REIT and Equity Trust Industry has reported subpar earnings for third-quarter 2023. Among the 12 companies that have reported so far, 33% failed to beat the Zacks Consensus Estimate, with 14 negative estimate revisions out of 17.
A hawkish Fed and the increasing probability of interest rates remaining high for a longer period continue to inject volatility in the mREITS market. The industry has fallen 19.86% over the past three months (as of Oct 31).
This has put mREITS ETFs such as VanEck Mortgage REIT Income ETF (MORT - Free Report) and iShares Mortgage Real Estate ETF (REM - Free Report) in focus.
Below, we highlight the Q3 results from companies belonging to the Zacks REIT and Equity Trust Industry.
Annaly Capital Management (NLY - Free Report)
On Oct 25, Annaly Capital reported second-quarter earnings available for distribution (EAD) per average share of 66 cents, which surpassed the Zacks Consensus Estimate of 65 cents. The bottom line declined from $1.06 in the year-ago quarter.
Net interest income (NII) was negative $45.33 million against the Zacks Consensus Estimate of $330 million, plunging year over year from $277.99 million.Annaly’s BVPS was $18.25 as of Sep 30, 2023, down 8.5% from $19.94 in the prior-year quarter.
According to Annaly’s management, Annaly had reduced leverage and significant liquidity, allowing them to maintain flexibility due to their adaptable hedging strategies. However, during the quarter, increased interest rates and spreads negatively impacted their book value and economic return, despite Annaly employing active portfolio management.
AGNC Investment (AGNC - Free Report)
On Oct 30, AGNC Investment reported third-quarter 2023 net spread and dollar roll income per common share of 65 cents, which beat the Zacks Consensus Estimate of 57 cents. However, the bottom line declined from 84 in the prior-year quarter.
Adjusted net interest and dollar roll income of $499 million moved down about 2.9% from the quarter-ago levels. AGNC’s net interest income was negative $53 million against $177 million in the year-ago quarter. The Zacks Consensus Estimate was pegged at $310.2 million.
During the third quarter, the results were supported by increasing asset yields. To navigate the shift in monetary policy, the company has strategically positioned itself by making prudent asset selections and timely adjustments to its portfolio. Moving ahead, investments in agency MBS are expected to generate appealing risk-adjusted returns.
ETFs in Focus
VanEck Mortgage REIT Income ETF (MORT - Free Report)
VanEck Mortgage REIT Income ETF seeks to track the performance of the MVIS US Mortgage REITs Index with a basket of 25 securities. The fund has gathered an asset base of $178 million and charges an annual fee of 0.41%. MORT has a high dividend yield of 15.6%.
VanEck Mortgage REIT Income ETF has exposure of 11.31% and 6.93% in NLY and AGNC, respectively. The fund has lost about 16.90% over the past month. However, MORT has added around 4.11% since Oct 26 (as of Oct 31).
iShares Mortgage Real Estate ETF (REM - Free Report)
iShares Mortgage Real Estate ETF seeks to track the performance of the FTSE NAREIT All Mortgage Capped Index with a basket of 32 securities. The fund has gathered an asset base of $498.3 million and charges an annual fee of 0.48%. REM has a high dividend yield of 11.9%.
iShares Mortgage Real Estate ETF has exposure of 15.56% and 8.62% in NLY and AGNC, respectively. The fund has 17.22% over the past month but has added about 5.05% since Oct 26 (as of Oct 31).