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What's in the Cards for AGNC Investment's (AGNC) Q2 Earnings?
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AGNC Investment Corp. (AGNC - Free Report) is scheduled to report its second-quarter 2023 results on Jul 24, 2023, after the closing bell. The company’s results are expected to reflect a year-over-year decline in earnings, while the top line is likely to rise.
This Bethesda, MD-based mortgage real estate investment trust (mREIT) posted a first-quarter 2023 net spread and dollar roll income per common share (excluding estimated "catch-up" premium amortization costs) of 70 cents per share, beating the Zacks Consensus Estimate of 61 cents. The bottom line declined from 72 cents in first-quarter 2022. Adjusted net interest and dollar roll income (excluding catch-up premium amortization) was $493 million, rising from the first-quarter 2022 number of $423 million.
Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on all occasions. It has an earnings surprise of 20.5%, on average, for the said period. The graph below depicts the surprise history:
In the second quarter of 2023, the U.S. Federal Reserve continued hiking the Fed Funds Rate, albeit at a slower pace, ending the quarter at a target rate of 5-5.25%. Also, the hawkish commentary by the Fed increased the front end of the curve and re-inverted the yield curve.
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 second quarter. We expect the same to be $229.9 million in second-quarter 2023.
High volatility, substantial spread widening and a notable increase in benchmark rates resulted in a challenging environment in the second quarter of 2023 for fixed-income markets. Amid the market turbulence, Agency mortgage-backed securities (MBS) are expected to have underperformed. This is likely to have affected AGNC Investment’s book value.
Also, in the second quarter, mortgage rates increased. As of the second-quarter 2023 end, the average rate on 30-year loans rose to 6.71% from the prior quarter’s 6.23%. Also, mortgage originations, both purchase and refinancing, continued to increase sequentially in the second quarter. With this, MBS prepayment speed is expected to have picked up since the beginning of the year.
Relatively higher levels of refinancing are anticipated to have affected AGNC’s MBS holdings. This is expected to have increased net premium amortization in the second quarter, impeding growth in interest income and average asset yield. Nonetheless, we expect an interest income of $571.9 million, up from $351 million in first-quarter 2023.
Greater volatility in the fixed-income markets is likely to have increased asset impairment risk and hedging mismatches for AGNC Investment in the quarter under review. In anticipation of a potential recession, spread widening and higher volatility, the company is expected to have rotated into agency assets from credit-sensitive assets.
Spread widening is also expected to have resulted in unrealized gains on investments for AGNC Investment in second-quarter 2023.
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 unrevised to 58 cents in the past month. Also, it indicates a fall of 30.1% from the year-ago reported figure. We estimate the metric to be 54 cents in the quarter to be reported.
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 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 has an Earnings ESP of 0.00%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
Here are two stocks from the broader REIT sector you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter, Crown Castle Inc. (CCI - Free Report) and SL Green Realty Corp. (SLG - Free Report) .
Crown Castle is slated to report its quarterly numbers on Jul 19. CCI has an Earnings ESP of +1.07% and carries a Zacks Rank of 2 presently.
SL Green Realty Corp. is slated to report its quarterly numbers on Jul 19. SLG has an Earnings ESP of +1.41% and a Zacks Rank of 3 at present.
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What's in the Cards for AGNC Investment's (AGNC) Q2 Earnings?
AGNC Investment Corp. (AGNC - Free Report) is scheduled to report its second-quarter 2023 results on Jul 24, 2023, after the closing bell. The company’s results are expected to reflect a year-over-year decline in earnings, while the top line is likely to rise.
This Bethesda, MD-based mortgage real estate investment trust (mREIT) posted a first-quarter 2023 net spread and dollar roll income per common share (excluding estimated "catch-up" premium amortization costs) of 70 cents per share, beating the Zacks Consensus Estimate of 61 cents. The bottom line declined from 72 cents in first-quarter 2022. Adjusted net interest and dollar roll income (excluding catch-up premium amortization) was $493 million, rising from the first-quarter 2022 number of $423 million.
Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on all occasions. It has an earnings surprise of 20.5%, 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 second-quarter earnings announcement.
In the second quarter of 2023, the U.S. Federal Reserve continued hiking the Fed Funds Rate, albeit at a slower pace, ending the quarter at a target rate of 5-5.25%. Also, the hawkish commentary by the Fed increased the front end of the curve and re-inverted the yield curve.
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 second quarter. We expect the same to be $229.9 million in second-quarter 2023.
High volatility, substantial spread widening and a notable increase in benchmark rates resulted in a challenging environment in the second quarter of 2023 for fixed-income markets. Amid the market turbulence, Agency mortgage-backed securities (MBS) are expected to have underperformed. This is likely to have affected AGNC Investment’s book value.
Also, in the second quarter, mortgage rates increased. As of the second-quarter 2023 end, the average rate on 30-year loans rose to 6.71% from the prior quarter’s 6.23%. Also, mortgage originations, both purchase and refinancing, continued to increase sequentially in the second quarter. With this, MBS prepayment speed is expected to have picked up since the beginning of the year.
Relatively higher levels of refinancing are anticipated to have affected AGNC’s MBS holdings. This is expected to have increased net premium amortization in the second quarter, impeding growth in interest income and average asset yield. Nonetheless, we expect an interest income of $571.9 million, up from $351 million in first-quarter 2023.
Greater volatility in the fixed-income markets is likely to have increased asset impairment risk and hedging mismatches for AGNC Investment in the quarter under review. In anticipation of a potential recession, spread widening and higher volatility, the company is expected to have rotated into agency assets from credit-sensitive assets.
Spread widening is also expected to have resulted in unrealized gains on investments for AGNC Investment in second-quarter 2023.
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 unrevised to 58 cents in the past month. Also, it indicates a fall of 30.1% from the year-ago reported figure. We estimate the metric to be 54 cents in the quarter to be reported.
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 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 has an Earnings ESP of 0.00%.
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
Here are two stocks from the broader REIT sector you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter, Crown Castle Inc. (CCI - Free Report) and SL Green Realty Corp. (SLG - Free Report) .
Crown Castle is slated to report its quarterly numbers on Jul 19. CCI has an Earnings ESP of +1.07% and carries a Zacks Rank of 2 presently.
SL Green Realty Corp. is slated to report its quarterly numbers on Jul 19. SLG has an Earnings ESP of +1.41% and a Zacks Rank of 3 at present.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.