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What's in the Offing for AGNC Investment's (AGNC) Q3 Earnings?
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AGNC Investment Corp. (AGNC - Free Report) is scheduled to report third-quarter 2021 results on Oct 25, 2021, after the closing bell. The company’s results are expected to reflect a year-over-year decline in earnings.
In the last reported quarter, this Bethesda, MD-based mortgage real estate investment trust (mREIT) posted net spread and dollar roll income (excluding estimated catch-up premium amortization costs) of 76 cents per share, beating the Zacks Consensus Estimate of 64 cents. Net interest income (NII) of $232 million declined 21.4% year over year. AGNC Investment primarily focuses on leveraged investments in agency mortgage-backed securities (MBS).
Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on all occasions. It has an earnings surprise of 24.2%, on average, for the said period. The graph below depicts the surprise history:
Let’s see how things have shaped up prior to the third-quarter earnings announcement.
While the steepening of the yield curve has provided some relief for margins, the near-zero interest rate environment is likely to have been an offsetting factor. A likely increase in liability costs as costs normalize along with continued pressure on asset yields is expected to have hindered margins.
The company’s tangible book value is expected to have declined in the third quarter. It reported an estimated tangible net book value of $16.25 per common share as of Aug 31, 2021.This indicates a decline from $16.39 reported at the end of the second quarter.
In the third quarter, although mortgage rates increased marginally on a sequential sequentially it remains at low levels. This has continued to drive refinancing activities in the quarter. Amid this, a significant portion of AGNC Investment’s MBS holdings is anticipated to have continued witnessing elevated levels of constant prepayment rate (“CPR”). Notably, the company’s investment portfolio had a weighted average actual CPR of 25.7% in the second quarter, up from 24.6% witnessed in first-quarter 2021.
This is anticipated to have led to higher net premium amortization in the September-end quarter, leading to a sequential decline in interest income and average asset yield. Lower prevailing yields on new asset purchases are also expected to have hindered overall asset yield growth.
Amid the increasing risk of rate volatility over the upcoming months, AGNC investment is expected to have resorted to defensive investment portfolio management on the back of portfolio contraction and deleveraging. This is expected to have led to lower interest income, thereby, affecting NII.
Nonetheless, the near-zero interest rate environment has facilitated a reduction in funding costs. This is likely to have kept interest expenses under control in the third quarter.
That said, with $58.1 billion of Agency MBS in its investment portfolio (as of Jun 30, 2021), AGNC Investment is expected to have enjoyed attractive risk-adjusted returns within the fixed-income markets and benefits from spread tightening in the third quarter. The strong tailwinds for agency MBS supported by continued Fed’s involvement in agency MBS and Treasury markets are expected to have shaped a favorable backdrop for TBA roll specialness.
AGNC Investment’s higher-coupon specified-pool MBS is expected to have aided its performance, with the benefits of slower projected prepayments.
The company’s activities in the quarter were inadequate to gain analysts’ confidence. As such, the Zacks Consensus Estimate of net spread and dollar roll income per common share has been unchanged at 63 cents in the past month. Nonetheless, it indicates a rise of 22.2% from the year-ago reported figure.
Earnings Whispers
Our proven model does not show that AGNC Investment is likely to beat estimates this quarter. This is because a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: AGNC Investment’s Earnings ESP is 0.00%.
Zacks Rank: The company currently carries a Zacks Rank of 5 (Strong Sell).
Here are a few stocks worth considering from the REIT space as our model shows that these have the right combination of elements to pull off a positive surprise this earnings season:
Blackstone Mortgage Trust, Inc. (BXMT - Free Report) , slated to release third-quarter earnings on Oct 27, has an Earnings ESP of +1.07% and a Zacks Rank of 2 at present.
Digital Realty Trust, Inc.(DLR - Free Report) , scheduled to report quarterly numbers on Oct 26, currently has an Earnings ESP of +1.24% and a Zacks Rank of 3.
Public Storage (PSA - Free Report) , slated to announce third-quarter results on Nov 1, currently has an Earnings ESP of +1.50% and a Zacks Rank of 2.
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What's in the Offing for AGNC Investment's (AGNC) Q3 Earnings?
AGNC Investment Corp. (AGNC - Free Report) is scheduled to report third-quarter 2021 results on Oct 25, 2021, after the closing bell. The company’s results are expected to reflect a year-over-year decline in earnings.
In the last reported quarter, this Bethesda, MD-based mortgage real estate investment trust (mREIT) posted net spread and dollar roll income (excluding estimated catch-up premium amortization costs) of 76 cents per share, beating the Zacks Consensus Estimate of 64 cents. Net interest income (NII) of $232 million declined 21.4% year over year. AGNC Investment primarily focuses on leveraged investments in agency mortgage-backed securities (MBS).
Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on all occasions. It has an earnings surprise of 24.2%, on average, for the said period. The graph below depicts the surprise history:
AGNC Investment Corp. Price and EPS Surprise
AGNC Investment Corp. price-eps-surprise | AGNC Investment Corp. Quote
Let’s see how things have shaped up prior to the third-quarter earnings announcement.
While the steepening of the yield curve has provided some relief for margins, the near-zero interest rate environment is likely to have been an offsetting factor. A likely increase in liability costs as costs normalize along with continued pressure on asset yields is expected to have hindered margins.
The company’s tangible book value is expected to have declined in the third quarter. It reported an estimated tangible net book value of $16.25 per common share as of Aug 31, 2021.This indicates a decline from $16.39 reported at the end of the second quarter.
In the third quarter, although mortgage rates increased marginally on a sequential sequentially it remains at low levels. This has continued to drive refinancing activities in the quarter. Amid this, a significant portion of AGNC Investment’s MBS holdings is anticipated to have continued witnessing elevated levels of constant prepayment rate (“CPR”). Notably, the company’s investment portfolio had a weighted average actual CPR of 25.7% in the second quarter, up from 24.6% witnessed in first-quarter 2021.
This is anticipated to have led to higher net premium amortization in the September-end quarter, leading to a sequential decline in interest income and average asset yield. Lower prevailing yields on new asset purchases are also expected to have hindered overall asset yield growth.
Amid the increasing risk of rate volatility over the upcoming months, AGNC investment is expected to have resorted to defensive investment portfolio management on the back of portfolio contraction and deleveraging. This is expected to have led to lower interest income, thereby, affecting NII.
Nonetheless, the near-zero interest rate environment has facilitated a reduction in funding costs. This is likely to have kept interest expenses under control in the third quarter.
That said, with $58.1 billion of Agency MBS in its investment portfolio (as of Jun 30, 2021), AGNC Investment is expected to have enjoyed attractive risk-adjusted returns within the fixed-income markets and benefits from spread tightening in the third quarter. The strong tailwinds for agency MBS supported by continued Fed’s involvement in agency MBS and Treasury markets are expected to have shaped a favorable backdrop for TBA roll specialness.
AGNC Investment’s higher-coupon specified-pool MBS is expected to have aided its performance, with the benefits of slower projected prepayments.
The company’s activities in the quarter were inadequate to gain analysts’ confidence. As such, the Zacks Consensus Estimate of net spread and dollar roll income per common share has been unchanged at 63 cents in the past month. Nonetheless, it indicates a rise of 22.2% from the year-ago reported figure.
Earnings Whispers
Our proven model does not show that AGNC Investment is likely to beat estimates this quarter. This is because a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: AGNC Investment’s Earnings ESP is 0.00%.
Zacks Rank: The company currently carries a Zacks Rank of 5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks That Warrant a Look
Here are a few stocks worth considering from the REIT space as our model shows that these have the right combination of elements to pull off a positive surprise this earnings season:
Blackstone Mortgage Trust, Inc. (BXMT - Free Report) , slated to release third-quarter earnings on Oct 27, has an Earnings ESP of +1.07% and a Zacks Rank of 2 at present.
Digital Realty Trust, Inc.(DLR - Free Report) , scheduled to report quarterly numbers on Oct 26, currently has an Earnings ESP of +1.24% and a Zacks Rank of 3.
Public Storage (PSA - Free Report) , slated to announce third-quarter results on Nov 1, currently has an Earnings ESP of +1.50% and a Zacks Rank of 2.