It has been about a month since the last earnings report for Annaly Capital Management (NLY Quick QuoteNLY - Free Report) . Shares have lost about 4.7% in that time frame, outperforming the S&P 500.

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

Annaly Q4 Earnings Top Estimates, NII & Book Value Dip

Annaly reported fourth-quarter 2021 earnings available for distribution (EAD) per share of 28 cents that surpassed the Zacks Consensus Estimate of 26 cents. The figure, however, compared unfavorably with the year-ago quarter’s 30 cents.

The NII was $361 million, surpassing the Zacks Consensus Estimate of $357 million. The figure declined 16.6% year over year.

With continued low financing costs, Annaly witnessed a rise in net interest spread. However, the company registered a year-over-year decline in book value per share (BVPS) and the average yield on interest-earning assets.

For the full year, Annaly reported EAD per share of $1.16, up 5.5% from the 2020 figure. The bottom line also beat the Zacks Consensus Estimate of $1.14 per share.

Full-year NII stood at $1.73 billion, up 30% from the number reported a year ago. Moreover, 2021 NII was in line with the Zacks Consensus Estimate.

Inside the Headlines

At the fourth-quarter end, Annaly had $89.2 billion of total assets, with 91% of assets invested in the Agency portfolio. At the end of the quarter, unencumbered assets stood at $9.3 billion.

In the reported quarter, the average yield on interest-earning assets (excluding premium amortization adjustment or PAA) was 2.63%, down from the prior-year quarter’s 2.8%. Average economic costs of interest-bearing liabilities were 0.75%, declining from 0.87%.

Net interest spread (excluding PAA) of 1.88% for the fourth quarter fell from 1.93% in the prior-year quarter. Nonetheless, the net interest margin (excluding PAA) in the reported quarter was 2.03% compared with 1.98% witnessed in fourth-quarter 2020.

Annaly’s BVPS was $7.97 as of Dec 31, 2021, sequentially down from $8.39. Moreover, BVPS compared unfavorably with $8.92 as of Dec 31, 2020. At the end of the reported quarter, Annaly’s economic capital ratio was 14.4%, rising from 13.6% in the prior-year quarter.

For the December quarter, the weighted average actual constant prepayment rate was 21.4%, sequentially down from 23.1%.

Economic leverage was 5.7X as of Dec 31, 2021, down from 5.8X, sequentially, and 6.2X in the prior-year quarter. Annaly generated an annualized EAD return on average equity (excluding PAA) of 13.1% in the fourth quarter, down from the prior-year quarter’s 13.03%.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

The consensus estimate has shifted 7.58% due to these changes.

VGM Scores

Currently, Annaly has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Annaly has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.