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What's in the Cards for AGNC Investment's (AGNC) Q1 Earnings?
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AGNC Investment Corp. (AGNC - Free Report) is scheduled to report first-quarter 2022 results on May 2, 2022, after the closing bell. The company’s results are expected to reflect a year-over-year decline in earnings.
This Bethesda, MD-based mortgage real estate investment trust (mREIT) posted a fourth-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 66 cents.
Adjusted net interest and dollar roll income (excluding catch-up premium amortization) was $440 million, surpassing the Zacks Consensus Estimate of $418 million. The reported figure, however, declined from the quarter-ago number of $443 million.
Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on all occasions. It has an earnings surprise of 17.6%, on average, for the said period. The graph below depicts the surprise history:
High volatility, substantial spread widening and a notable increase in benchmark rates resulted in a challenging environment in the first quarter of 2022 for fixed-income markets. Amid the market turbulence, Agency mortgage-backed securities (MBS) underperformed. This is likely to have affected the company’s book value.
The company’s tangible book value is expected to have declined in the first quarter. It reported an estimated tangible net book value of $13.48 per common share as of Feb 28, 2022.This marks a decline from $15.75 reported at the end of the prior quarter.
Mortgage originations, both purchase and refinancing, continued to normalize in the first quarter. Mortgage originations volumes have been facing tough comps from the prior year, which have been propelled by low mortgage rates.
However, in the first quarter, mortgage rates increased. As of the first-quarter 2022 end, the average rate on the 30-year loan rose to 4.67%, in sharp contrast to last year’s record-low mortgage rates of around 3%.
Hence, mortgage origination activities are estimated to have decreased dramatically, with rising rates discouraging refinancing activity.
Reduced levels of refinancing are anticipated to have alleviated pressure from AGNC’s MBS holdings, which have been witnessing elevated levels of prepayments over the past few quarters. This is expected to have reduced net premium amortization in the first quarter, offering scope for growth in interest income and average asset yield.
In anticipation of the Fed’s purchase tapering plans, as well as expected spread widening and higher volatility, the company has been trimming its investment portfolio over the past few quarters. This is expected to have led to lower interest income, thereby affecting NII in the first quarter.
Greater volatility in the fixed income markets has increased asset impairment risk and hedging mismatches for AGNC Investment in the quarter under review.
Also, given the rise in interest rates in the quarter, the company is expected to have seen higher funding costs. This is likely to have increased interest expenses in the first 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 61 cents in the past month. Also, it indicates a fall of 19.7% 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 -2.75%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
A few REIT stocks that 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, are Hannon Armstrong Sustainable Infrastructure Capital (HASI - Free Report) , Public Storage (PSA - Free Report) and Host Hotels & Resorts, Inc. (HST - Free Report) .
Hannon Armstrong is slated to release first-quarter 2022 earnings on May 3. HASI has an Earnings ESP of +2.40% and a Zacks Rank of 2 at present.
Public Storage, slated to release first-quarter earnings on May 3, has an Earnings ESP of +0.50% and a Zacks Rank of 2 at present.
Host Hotels & Resorts, scheduled to report quarterly figures on May 4, has an Earnings ESP of +4.07% and it currently sports a Zacks Rank of 1.
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What's in the Cards for AGNC Investment's (AGNC) Q1 Earnings?
AGNC Investment Corp. (AGNC - Free Report) is scheduled to report first-quarter 2022 results on May 2, 2022, after the closing bell. The company’s results are expected to reflect a year-over-year decline in earnings.
This Bethesda, MD-based mortgage real estate investment trust (mREIT) posted a fourth-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 66 cents.
Adjusted net interest and dollar roll income (excluding catch-up premium amortization) was $440 million, surpassing the Zacks Consensus Estimate of $418 million. The reported figure, however, declined from the quarter-ago number of $443 million.
Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on all occasions. It has an earnings surprise of 17.6%, 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 first-quarter earningsannouncement.
High volatility, substantial spread widening and a notable increase in benchmark rates resulted in a challenging environment in the first quarter of 2022 for fixed-income markets. Amid the market turbulence, Agency mortgage-backed securities (MBS) underperformed. This is likely to have affected the company’s book value.
The company’s tangible book value is expected to have declined in the first quarter. It reported an estimated tangible net book value of $13.48 per common share as of Feb 28, 2022.This marks a decline from $15.75 reported at the end of the prior quarter.
Mortgage originations, both purchase and refinancing, continued to normalize in the first quarter. Mortgage originations volumes have been facing tough comps from the prior year, which have been propelled by low mortgage rates.
However, in the first quarter, mortgage rates increased. As of the first-quarter 2022 end, the average rate on the 30-year loan rose to 4.67%, in sharp contrast to last year’s record-low mortgage rates of around 3%.
Hence, mortgage origination activities are estimated to have decreased dramatically, with rising rates discouraging refinancing activity.
Reduced levels of refinancing are anticipated to have alleviated pressure from AGNC’s MBS holdings, which have been witnessing elevated levels of prepayments over the past few quarters. This is expected to have reduced net premium amortization in the first quarter, offering scope for growth in interest income and average asset yield.
In anticipation of the Fed’s purchase tapering plans, as well as expected spread widening and higher volatility, the company has been trimming its investment portfolio over the past few quarters. This is expected to have led to lower interest income, thereby affecting NII in the first quarter.
Greater volatility in the fixed income markets has increased asset impairment risk and hedging mismatches for AGNC Investment in the quarter under review.
Also, given the rise in interest rates in the quarter, the company is expected to have seen higher funding costs. This is likely to have increased interest expenses in the first 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 61 cents in the past month. Also, it indicates a fall of 19.7% 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 -2.75%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks Worth a Look
A few REIT stocks that 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, are Hannon Armstrong Sustainable Infrastructure Capital (HASI - Free Report) , Public Storage (PSA - Free Report) and Host Hotels & Resorts, Inc. (HST - Free Report) .
Hannon Armstrong is slated to release first-quarter 2022 earnings on May 3. HASI has an Earnings ESP of +2.40% and a Zacks Rank of 2 at present.
Public Storage, slated to release first-quarter earnings on May 3, has an Earnings ESP of +0.50% and a Zacks Rank of 2 at present.
Host Hotels & Resorts, scheduled to report quarterly figures on May 4, has an Earnings ESP of +4.07% and it currently sports a Zacks Rank of 1.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.