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Annaly Capital Management, Inc. (NLY - Free Report) reported first-quarter 2018 core earnings, excluding premium amortization adjustment (PAA) of 30 cents per share, in line with the Zacks Consensus Estimate. However, earnings came in marginally lower compared with the prior-quarter figure of 31 cents.
Results, to a great extent, benefited from higher gains on disposal of investments and an increase in interest income. Also, the company witnessed further diversification of funding sources relating to residential mortgage loans during the reported quarter. However, higher interest expenses, and general and administrative expenses remained major headwinds.
Results highlight an increase in net interest income (NII) in the first quarter, which totaled $512.1 million, representing sequential growth of 20%.
The company also announced that it will acquire MTGE Investment Corp., for $900 million, in a cash-and-stock deal. This values MTGE at $19.65 per share of MTGE common stock. The transaction is a strategic fit, as it will provide further scale and diversification options to the company’s investment platform, increasing the number of options to 37. Moreover, it is estimated that Annaly will have 27% of its capital allocated to credit assets. Also, it is accretive to the company’s 2018 core earnings per common share. The acquisition is expected to strengthen Annaly’s capital base and support its long-term growth. The transaction is likely to close in third-quarter 2018.
Quarter in Detail
In the reported quarter, average yield on interest-earning assets (excluding PAA) was 2.99%, down from 3.02% reported in the previous quarter.
Net interest rate spread (excluding PAA) of 1.09% for the first quarter edged down from 1.19% reported in the prior quarter. Net interest margin (excluding PAA) came in at 1.52% compared with 1.51% recorded in the prior quarter.
The company’s investment at fair value of Agency mortgage-backed securities was nearly $88.6 billion as of Mar 31, 2018, down from $90.6 billion as of Dec 31, 2017.
Annaly’s book value per share came in at $10.53 as of Mar 31, 2018, compared with $11.34 as of Dec 31, 2017. At the end of the first quarter, the company’s capital ratio was 13.1%, up from 12.9% reported at the end of the previous quarter.
Leverage was 6:1:1 as of Mar 31, 2018, compared with 5:7:1 as of Dec 31, 2017. The company offered an annualized core return on average equity of 10.7% in the reported quarter, marginally up from 10.67% in the prior quarter.
Our Take
We are impressed by Annaly’s in-line results. The company significantly increased its hedge ratio to 94% during the quarter from 70% as of Dec 31, 2017. Amid a high volatility and rising interest-rate environment, this favors the company’s performance for the long term.
Moreover, the company made efforts to diversify its funding source relating to residential mortgage loans and increased allocation to credit business to 26%.
Annaly Capital Management Inc Price, Consensus and EPS Surprise
Taubman Centersreported first-quarter 2018 adjusted FFO per share of $1.04, surpassing the Zacks Consensus Estimate of 92 cents. The figure also came in 13% higher than the year-ago tally of 92 cents.
Simon Property Group, Inc. (SPG - Free Report) posted first-quarter 2018 FFO of $2.87 per share, which beat the Zacks Consensus Estimate of $2.83. Also, the reported figure came in 4.7% higher than the prior-year tally of $2.74.
Regency Centers Corporation’s (REG - Free Report) first-quarter 2018 FFO per share of 96 cents outpaced the Zacks Consensus Estimate of 94 cents. Further, results compared favorably with 27 cents reported in the year-earlier quarter. However, results in the year-ago period included one-time merger-related costs of 55 cents per share.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Annaly (NLY) Meets Q1 Earnings, Announces MTGE Acquisition
Annaly Capital Management, Inc. (NLY - Free Report) reported first-quarter 2018 core earnings, excluding premium amortization adjustment (PAA) of 30 cents per share, in line with the Zacks Consensus Estimate. However, earnings came in marginally lower compared with the prior-quarter figure of 31 cents.
Results, to a great extent, benefited from higher gains on disposal of investments and an increase in interest income. Also, the company witnessed further diversification of funding sources relating to residential mortgage loans during the reported quarter. However, higher interest expenses, and general and administrative expenses remained major headwinds.
Results highlight an increase in net interest income (NII) in the first quarter, which totaled $512.1 million, representing sequential growth of 20%.
The company also announced that it will acquire MTGE Investment Corp., for $900 million, in a cash-and-stock deal. This values MTGE at $19.65 per share of MTGE common stock. The transaction is a strategic fit, as it will provide further scale and diversification options to the company’s investment platform, increasing the number of options to 37. Moreover, it is estimated that Annaly will have 27% of its capital allocated to credit assets. Also, it is accretive to the company’s 2018 core earnings per common share. The acquisition is expected to strengthen Annaly’s capital base and support its long-term growth. The transaction is likely to close in third-quarter 2018.
Quarter in Detail
In the reported quarter, average yield on interest-earning assets (excluding PAA) was 2.99%, down from 3.02% reported in the previous quarter.
Net interest rate spread (excluding PAA) of 1.09% for the first quarter edged down from 1.19% reported in the prior quarter. Net interest margin (excluding PAA) came in at 1.52% compared with 1.51% recorded in the prior quarter.
The company’s investment at fair value of Agency mortgage-backed securities was nearly $88.6 billion as of Mar 31, 2018, down from $90.6 billion as of Dec 31, 2017.
Annaly’s book value per share came in at $10.53 as of Mar 31, 2018, compared with $11.34 as of Dec 31, 2017. At the end of the first quarter, the company’s capital ratio was 13.1%, up from 12.9% reported at the end of the previous quarter.
Leverage was 6:1:1 as of Mar 31, 2018, compared with 5:7:1 as of Dec 31, 2017. The company offered an annualized core return on average equity of 10.7% in the reported quarter, marginally up from 10.67% in the prior quarter.
Our Take
We are impressed by Annaly’s in-line results. The company significantly increased its hedge ratio to 94% during the quarter from 70% as of Dec 31, 2017. Amid a high volatility and rising interest-rate environment, this favors the company’s performance for the long term.
Moreover, the company made efforts to diversify its funding source relating to residential mortgage loans and increased allocation to credit business to 26%.
Annaly Capital Management Inc Price, Consensus and EPS Surprise
Annaly Capital Management Inc Price, Consensus and EPS Surprise | Annaly Capital Management Inc Quote
Currently, Annaly carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Stocks
Taubman Centersreported first-quarter 2018 adjusted FFO per share of $1.04, surpassing the Zacks Consensus Estimate of 92 cents. The figure also came in 13% higher than the year-ago tally of 92 cents.
Simon Property Group, Inc. (SPG - Free Report) posted first-quarter 2018 FFO of $2.87 per share, which beat the Zacks Consensus Estimate of $2.83. Also, the reported figure came in 4.7% higher than the prior-year tally of $2.74.
Regency Centers Corporation’s (REG - Free Report) first-quarter 2018 FFO per share of 96 cents outpaced the Zacks Consensus Estimate of 94 cents. Further, results compared favorably with 27 cents reported in the year-earlier quarter. However, results in the year-ago period included one-time merger-related costs of 55 cents per share.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
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