These “Bear of the Day” articles are not meant to be a Hindenburg Research style takedown of a company. Rather than being a hit piece, they are meant to call attention to recent earnings estimate action that investors may not have been aware of. Today’s subject is in the Financial – Mortgage & Related Services industry which ranks in the Top 38% of our Zacks Industry Rank.

Today’s Bear of the Day is Zacks Rank #5 (Strong Sell) Ellington Financial (EFC Quick QuoteEFC - Free Report) ). Ellington Financial Inc., through its subsidiary, Ellington Financial Operating Partnership LLC, acquires and manages mortgage-related, consumer-related, corporate-related, and other financial assets in the United States. The company acquires and manages residential mortgage-backed securities (RMBS) backed by prime jumbo, Alt-A, manufactured housing, and subprime mortgage; RMBS for which the principal and interest payments are guaranteed by the U.S. government agency or the U.S. government-sponsored entity; residential mortgage loans; commercial mortgage-backed securities; and commercial mortgage loans and other commercial real estate debt. 

The reason for the bearish stance isn’t because of the growth numbers, they are stellar. Current year revenue growth is 16% with next year’s estimates coming in at 25%. Earnings forecasts call for 7.69% growth this year and 13.31% next year.

The reason is the recent earnings estimate revisions coming in to the downside for the stock. Over the last sixty days, two analysts have cut their estimates for the current year and next year. The cuts have dropped our Zacks Consensus Estimate for the current year from $1.81 to $1.54 with next year’s number off from $1.95 to $1.74.

There are other stocks within the industry that have seen estimates move in the positive direction. These include Zacks Rank #1 (Strong Buy) stocks PennyMac Financial (PFSI Quick QuotePFSI - Free Report) and Velocity Financial (VEL Quick QuoteVEL - Free Report) ).