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Why Is AGNC Investment (AGNC) Down 3% Since Last Earnings Report?

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A month has gone by since the last earnings report for AGNC Investment (AGNC - Free Report) . Shares have lost about 3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is AGNC Investment due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

AGNC Investment Tops on Q3 Net Spread and Dollar Roll

AGNC Investment reported a third-quarter 2021 net spread and dollar roll income per common share (excluding estimated "catch-up" premium amortization costs) of 75 cents per share, beating the Zacks Consensus Estimate of 63 cents. However, the reported figure declined from the third-quarter 2020 number of 81 cents.

Adjusted net interest and dollar roll income (excluding catch-up premium amortization) was $443 million, surpassing the Zacks Consensus Estimate of $397 million. The reported figure, however, declined from the year-ago number of $494 million.

NII of $279 million declined 7.6% from the prior-year quarter’s $302 million.

The company reported a third-quarter comprehensive income per common share of 37 cents compared with the prior quarter’s income of $1.28.

As of Sep 30, 2021, its tangible net book value per share (“BVPS”) was $16.41, up marginally from $16.39 as of Jun 30, 2021. Also, it compares favorably with BVPS of $15.88 as of Sep 30, 2020.

The economic return on tangible common equity for the company in the reported quarter was 2.3%. This included a dividend per share of 36 cents and an increase of 2 cents in tangible net BVPS.

Inside the Headlines

As of Sep 30, 2021, the company’s investment portfolio aggregated $84.1 billion. This included $53.7 billion of Agency mortgage backed securities, $28.3 billion of TBA securities, and $2.1 billion of credit risk transfer and non-Agency securities.

Inclusive of its net TBA position and net payable/ (receivable) for unsettled securities, AGNC Investment’s tangible net book value "at risk" leverage ratio was 7.5X as of Sep 30, 2021, compared with 8.8X in the prior-year quarter.

For the September-end quarter, the company's investment portfolio bore a weighted average actual CPR of 22.5%, down from 24.3 % witnessed in third-quarter 2020.

Excluding the net TBA position, AGNC Investment's average asset yield on its portfolio, excluding the net TBA position, was 2.3% in the third quarter, up from 2.28% recorded in the prior-year quarter.

For the September-end quarter, the combined average cost of funds, inclusive of interest rate swap costs, was a net benefit of 0.03%, against net costs of 0.15% witnessed in the previous year.

The average net interest spread (excluding catch-up premium amortization) was 2.19%, up from 2.15% reported in the prior-year quarter.

As of Sep 30, 2021, AGNC Investment’s cash and cash equivalents totaled $981 million, down from $1.01 billion as of Dec 31, 2020.

Capital Deployment Activity

In the third quarter, AGNC Investment announced a dividend of 12 cents per share each for July, August and September. Notably, the company announced $11 billion in common stock dividends or $43.96 per common share since its initial public offering in May 2008 through third-quarter 2021.

On Oct 21, 2021, the company's board of directors replaced its existing stock repurchase plan, expiring Dec 31, 2021, with a $1-billion plan to repurchase through Dec 31, 2022.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

At this time, AGNC Investment has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

AGNC Investment has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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