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What's in Store for AGNC Investment's (AGNC) Q4 Earnings?
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AGNC Investment Corp. (AGNC - Free Report) is scheduled to report fourth-quarter and 2021 results on Jan 31, 2022, after the closing bell. The company’s results are expected to reflect a year-over-year decline in earnings and net interest income.
In the last reported quarter, this Bethesda, MD-based mortgage real estate investment trust (mREIT) posted 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. Net interest income (NII) of $279 million declined 7.6% from the prior-year quarter’s $302 million. 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 18.4%, on average, for the said period. The graph below depicts the surprise history:
Although mortgage rates increased marginally on a sequential basis, the same remained at low levels in the fourth quarter. This has continued to drive refinancing activities in the quarter, albeit at a normalized level. 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 weighted average projected CPR for the remaining life of the company's Agency securities was 10.7% as of the third-quarter end.
This is anticipated to have led to higher net premium amortization in the December-end quarter, with a sequential decline in interest income and average asset yield. Lower prevailing yields on asset purchases are also expected to have hindered overall asset yield growth.
Also, the near-zero interest rates in the fourth quarter are expected to have hindered margins.
The company’s tangible book value is expected to have declined in the fourth quarter due to spread widening. It reported an estimated tangible net book value of $15.80 per common share as of Nov 30, 2021.This indicates a decline from $16.41 reported at the end of the third quarter.
In anticipation of the Fed’s purchase tapering plans as well as expected spread widening and higher volatility, the company trimmed its investment portfolio in the second and third quarters of 2021. This is expected to have led to lower interest income, thereby affecting NII in Q4.
Greater volatility in the fixed income markets has increased asset impairment risk and hedging mismatches for AGNC Investment in the quarter under review.
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 fourth quarter.
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 revised marginally downward to 66 cents in the past month. Also, it indicates a fall of 12% 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 -12.98%.
Zacks Rank: The company currently carries a Zacks Rank of 4 (Sell).
A few finance stocks, which you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Franklin Resources (BEN - Free Report) , Ameriprise Financial (AMP - Free Report) and Prosperity Bancshares (PB - Free Report) .
The Earnings ESP for Franklin is +0.11% and it carries a Zacks Rank of 3 at present. BEN is scheduled to report quarterly numbers on Feb 1.
Ameriprise Financial is slated to report quarterly results on Jan 26. AMP currently has an Earnings ESP of +0.69% and a Zacks Rank #2.
Prosperity Bancshares is slated to report quarterly earnings on Jan 26. PB, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +0.55%.
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What's in Store for AGNC Investment's (AGNC) Q4 Earnings?
AGNC Investment Corp. (AGNC - Free Report) is scheduled to report fourth-quarter and 2021 results on Jan 31, 2022, after the closing bell. The company’s results are expected to reflect a year-over-year decline in earnings and net interest income.
In the last reported quarter, this Bethesda, MD-based mortgage real estate investment trust (mREIT) posted 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. Net interest income (NII) of $279 million declined 7.6% from the prior-year quarter’s $302 million. 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 18.4%, 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 fourth-quarter earnings announcement.
Although mortgage rates increased marginally on a sequential basis, the same remained at low levels in the fourth quarter. This has continued to drive refinancing activities in the quarter, albeit at a normalized level. 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 weighted average projected CPR for the remaining life of the company's Agency securities was 10.7% as of the third-quarter end.
This is anticipated to have led to higher net premium amortization in the December-end quarter, with a sequential decline in interest income and average asset yield. Lower prevailing yields on asset purchases are also expected to have hindered overall asset yield growth.
Also, the near-zero interest rates in the fourth quarter are expected to have hindered margins.
The company’s tangible book value is expected to have declined in the fourth quarter due to spread widening. It reported an estimated tangible net book value of $15.80 per common share as of Nov 30, 2021.This indicates a decline from $16.41 reported at the end of the third quarter.
In anticipation of the Fed’s purchase tapering plans as well as expected spread widening and higher volatility, the company trimmed its investment portfolio in the second and third quarters of 2021. This is expected to have led to lower interest income, thereby affecting NII in Q4.
Greater volatility in the fixed income markets has increased asset impairment risk and hedging mismatches for AGNC Investment in the quarter under review.
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 fourth quarter.
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 revised marginally downward to 66 cents in the past month. Also, it indicates a fall of 12% 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 -12.98%.
Zacks Rank: The company currently carries a Zacks Rank of 4 (Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks That Warrant a Look
A few finance stocks, which you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Franklin Resources (BEN - Free Report) , Ameriprise Financial (AMP - Free Report) and Prosperity Bancshares (PB - Free Report) .
The Earnings ESP for Franklin is +0.11% and it carries a Zacks Rank of 3 at present. BEN is scheduled to report quarterly numbers on Feb 1.
Ameriprise Financial is slated to report quarterly results on Jan 26. AMP currently has an Earnings ESP of +0.69% and a Zacks Rank #2.
Prosperity Bancshares is slated to report quarterly earnings on Jan 26. PB, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +0.55%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.