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Can Arbor Realty (ABR) Retain Its Beat Streak in Q1 Earnings?

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Arbor Realty Trust (ABR - Free Report) is scheduled to report first-quarter 2022 results on May 6, before market open. The company is expected to have witnessed year-over-year growth in the net interest income (NII), whereas its earnings are anticipated to have declined.

In the last reported quarter, the New York-headquartered real estate investment trust (REIT), which primarily focuses on originating and servicing loans for multi-family, single-family and other commercial real estate assets, posted distributable earnings per share of 57 cents, surpassing the Zacks consensus estimate of 40 cents. NII of $76.4 million surged 65.8% year over year.

Over the trailing four quarters, Arbor Realtysurpassed the Zacks Consensus Estimate on all occasions, the surprise being 29.6%. The graph below depicts this surprise history:

Arbor Realty Trust Price and EPS Surprise

 

Arbor Realty Trust Price and EPS Surprise

Arbor Realty Trust price-eps-surprise | Arbor Realty Trust Quote

Factors at Play

Arbor Realty’s diversified investment focus on commercial real estate debt investments, mortgage servicing, and commercial mortgage-backed securities is likely to have enabled it to generate stable income in the first quarter despite the changing economic environment.

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 underperformed.

Mortgage originations, both purchase and refinancing, continued to normalize in the first quarter. The strength in originations in 2021, propelled by the ultra-low rates, is also making comparison difficult for the quarter. Notably, mortgage rates rose in the quarter under review.

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 rate of around 3%. This led to a drastic fall in mortgage origination activities, with steadily rising rates hurting refinancing.

Low multifamily mortgage loan securitization and originations in the first quarter are expected to have reduced the company’s fee-based servicing portfolio, thereby affecting servicing revenues.

The Zacks Consensus Estimate for first-quarter 2022 net gain on sales, including fee-based services, is pegged at $24.2 million, indicating a sequential fall of 34.4%.

Also, the consensus estimate for net servicing revenues is pegged at $19.4 million, suggesting a sequential fall of 18.8%.

Nonetheless, a relatively favorable prepayment scenario in the quarter is likely to have alleviated pressure from NII in the quarter. The Zacks Consensus Estimate for the company’s quarterly NII is pegged at $165.2 million, suggesting an improvement of 81.3% on a year-over-year basis.

Lastly, analysts have shown optimism prior to the first-quarter earnings release. The Zacks Consensus Estimate for quarterly earnings has been revised marginally upward to 44 cents over the past month. It suggests a year-over-year decline of 15.4%.

Here is what our quantitative model predicts:

Arbor Realty has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Arbor Realty is +3.45%.

Zacks Rank: Arbor Realty currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Granite Point Mortgage Trust (GPMT - Free Report) is slated to announce first-quarter 2022 results on May 10. The company currently carries a Zacks Rank #3.

GPMT’s earnings estimates for the to-be-reported quarter have been unchanged over the past 30 days.

Welltower (WELL - Free Report) is scheduled to report quarterly figures on May 10. Welltower currently carries a Zacks Rank of 3.

WELL’s earnings estimates for the to-be-reported quarter have been unchanged over the past 30 days.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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