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What's in the Cards for Arbor Realty (ABR) in Q2 Earnings?

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Arbor Realty Trust (ABR - Free Report) is scheduled to report second-quarter 2021 results on Jul 30, before market open. The company’s results will likely reflect year-over-year growth in interest income.

In the last reported quarter, the New York-headquartered real estate investment trust (REIT), which primarily focuses on originating and servicing loans for multi-family, single-family and other commercial real estate assets, posted distributable EPS of 52 cents, reflecting year-over-year growth. For the March-end quarter, its Agency business generated revenues of $89.3 million (excluding gains and losses on derivative instruments).

Over the trailing four quarters, Arbor Realty surpassed the Zacks Consensus Estimate on three occasions and missed in the other, the average beat being 7.74%. The graph below depicts this surprise history:

Arbor Realty Trust Price and EPS Surprise


Arbor Realty Trust Price and EPS Surprise

Arbor Realty Trust price-eps-surprise | Arbor Realty Trust Quote

Factors at Play

Arbor Realty’s diversified investment focus on commercial real estate debt investments, mortgage servicing, and commercial mortgage-backed securities is likely to have enabled it to generate stable income in the second quarter despite the changing economic environment.

New agency loan originations in the second quarter are expected to have expanded the company’s fee-based servicing portfolio, thereby, driving servicing revenues. The consensus mark for second-quarter 2021 net servicing revenues is pegged at $16 million, indicating a marginal sequential rise.

A sequential decline in mortgage rates in the second quarter is likely to have favored purchase and refinance mortgage volumes. However, mortgage originations are expected to have subsided from the post-pandemic peak in the first quarter. Lower affordability for new homes has also increased pricing pressure, thereby, hindering new purchase originations. This along with heightening competition and tighter spreads are anticipated to have affected gain on sale margins and the company’s Agency origination business.

Arbor Realty’s loan portfolio has significant exposure to multifamily assets. While a rebound in demand for multi-family properties in the quarter under review has lent support, the asset class has been vulnerable to the impacts of the pandemic.  Payment delinquencies, defaults, loan modifications and foreclosures are expected to have marred the company’s performance in second-quarter 2021.

Lower interest rates, soft loan demand and flattening of the yield curve are likely to have hindered net interest income growth. Higher prepayment in the quarter is likely to have led to lower asset yields as high-yielding loans are paid off and are replaced with low-yielding ones. Borrowers continued to resort to refinancing in the quarter under review. This is anticipated to have resulted in higher amortization, thereby, affecting net income.

The Zacks Consensus Estimate for the company’s quarterly net interest income is pegged at $100 million, suggesting an improvement of 20.3% on a year-over-year basis.

Lastly, there has been a lack of any solid catalyst that could instill optimism prior to the second-quarter earnings release. The Zacks Consensus Estimate for quarterly earnings has been unchanged at 36 cents over the past month.

Here is what our quantitative model predicts:

Arbor Realty does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Arbor Realty is 0.00%.

Zacks Rank: American Tower currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a beat their upcoming release:

Duke Realty Corp. (DRE - Free Report) , slated to release second-quarter earnings on Jul 28, has an Earnings ESP of +0.47% and a Zacks Rank of 3 at present.

Digital Realty Trust, Inc. (DLR - Free Report) , scheduled to report quarterly numbers on Jul 29, currently has an Earnings ESP of +0.63% and a Zacks Rank of 3.

Public Storage (PSA - Free Report) , slated to announce second-quarter results on Aug 3, currently has an Earnings ESP of +0.89% and a Zacks Rank of 3.