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Chimera (CIM) to Report Q2 Earnings: What's in the Offing?

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Chimera Investment Corporation (CIM - Free Report) is scheduled to report second-quarter 2021 results on Aug 4, before the opening bell. The company’s quarterly earnings per share (EPS) and net interest income (NII) are expected to have improved year over year.

In the last reported quarter, the mortgage real estate investment trust reported core earnings of 36 cents per share, surpassing the Zacks Consensus Estimate of 31 cents. Robust net realized gains on sales of investments drove the bottom-line performance.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on three occasions and missed in the other. It delivered a surprise of 5.9%, on average, during this period. The graph below depicts this surprise history:

Chimera Investment Corporation Price and EPS Surprise

 

Chimera Investment Corporation Price and EPS Surprise

Chimera Investment Corporation price-eps-surprise | Chimera Investment Corporation Quote

 

Factors to Note

In the second quarter, the housing market continued to be resilient, supported by low mortgage rates and high demand. Home price appreciation on the back of limited supply of residential properties available for sale offered notable tailwinds for housing finance. Chimera’s second-quarter results are likely to reflect the favorable impact of this backdrop.

Securitization of assets is a crucial component of the company’s business model, offering low-cost, long-term, non-recourse debt for mortgage assets on its balance sheet.After executing four important securitizations in the first quarter, the company is anticipated to have continued these efforts in the April-June period as well, thereby, enjoying durable portfolio interest income.

In June, the company sponsored a $545.7-million securitization of seasoned reperforming residential mortgage loans and its third prime jumbo securitization of $320.3 million.

Given Fed’s near-zero interest rates in the quarter, the company’s bottom line is likely to have benefited from low funding costs. This is also anticipated to have driven its net interest margin.

However, the second quarter witnessed high rate and spread volatility, while prepayment remained elevated amid low rates. MBS spreads to benchmark rates widened for a significant part of the second quarter, which led to a challenging environment for Agency securities. Given Chimera’s significant exposure to Agency securities, this is likely to have hindered asset yields and valuations.

Amid the concerns, the company is expected to have focused on commercial real estate securities as transaction volume increased propelled by low rates, favorable loan spreads, high liquidity in the market and improving real estate fundamentals.

For the June-end quarter, NII estimate is pegged at $123.5 million, indicating year-over-year growth of 5.8%.

Lastly, prior to the second-quarter earnings release, the company’s quarterly activities were inadequate to gain analyst confidence. Accordingly, the Zacks Consensus Estimate for the company’s EPS has been unchanged at 37 cents over the past month. It also suggests growth of 15.6% from the year-ago reported figure.

Here is what our quantitative model predicts:

Chimera does not have the right combination of two key ingredients — a positive Earnings ESP and 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 Chimera is 0.00%.

Zacks Rank: Chimera carries a Zacks Rank #3.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks Worth a Look

Here are some finance stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around.

Federal Realty Investment Trust (FRT - Free Report) is slated to release results on Aug 4. It has an Earnings ESP of +2.11% and carries a Zacks Rank #3 at present.

Macerich (MAC - Free Report) presently has an Earnings ESP of +4.30% and a Zacks Rank #3. It is scheduled to report results on Aug 4.

Ventas, Inc. (VTR - Free Report) currently has an Earnings ESP of +0.12% and a Zacks Rank #3. It is scheduled to report results on Aug 6.