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Why Is AGNC Investment (AGNC) Up 2.3% Since the Last Earnings Report?

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About a month has gone by since the last earnings report for AGNC Investment Corp. (AGNC - Free Report) . Shares have added about 2.3% in that time frame, outperforming the market.

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

AGNC Investment's Earnings Surpass Estimates in Q2

AGNC Investment reported second-quarter 2017 net spread and dollar roll income of 67 cents per share (excluding estimated "catch-up" premium amortization cost), comfortably beating the Zacks Consensus Estimate of 59 cents. The prior-quarter figure was 64 cents per share.

Moreover, second-quarter comprehensive income per common share came at 40 cents, ahead of 35 cents recorded in the prior quarter.

The economic return on tangible common equity for the company during the quarter was 2.5%. This included dividend per share of $0.54 and a fall of $0.06 in tangible net book value per share.

However, as of Jun 30, 2017, the company’s tangible net book value per share was $19.25, down from $19.31 as of Mar 31, 2017.

Also, net interest income (NII) of $181 million was lower than the prior-quarter figure of $198 million.

Inside the Headlines

As of Jun 30, 2017, the company’s investment portfolio aggregated $63.8 billion. This included $63.2 billion of Agency MBS and to-be-announced (TBA) securities and $0.6 billion of credit risk transfer (CRT) and non-agency securities.

Inclusive of its net TBA position and net payable/(receivable) for unsettled securities, AGNC Investment’s tangible net book value "at risk" leverage ratio was 8.1x as of Jun 30, 2017, against 8.0x as of Mar 31, 2017.

For the second quarter, the company's investment portfolio bore a weighted average constant repayment rate (CPR) of 10.9%, up from 10.7% in the prior quarter.

Excluding "catch-up" premium amortization, AGNC Investment's average asset yield was 2.78% for the second quarter, up from 2.76% for the prior quarter.

Average cost of funds, excluding the net TBA position, was 1.51% in the second quarter, denoting an increase from 1.48% in the prior quarter.  The rise was mainly because of higher repo rates, which were mostly offset by an uptick in the average floating rate received on AGNC Investment’s interest rate swaps.

Excluding "catch-up" premium amortization, combined annualized net interest rate spread for the quarter was 1.55%, an increase from 1.51% in the prior quarter.

Notably, the combined annualized net interest rate spread on its balance sheet and dollar roll funded assets in the quarter gained from a larger dollar roll position as well as favorable funding dynamics in the dollar roll market.

Also, as of Jun 30, 2017, AGNC Investment’s cash and cash equivalents totaled around $1.12 billion, up from $1.07 billion as of Mar 31, 2017.

Dividend Update

In the second quarter, AGNC Investment declared monthly dividends of 18 cents per share for April, May and June. Notably, the company had declared a total of $7.1 billion in common stock dividends or $36.08 per common share, since its initial public offering in May 2008 through the second quarter of 2017.

How have estimates been moving since then?

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

AGNC Investment Corp. Price and Consensus

VGM Scores

At this time, AGNC Investment's stock has a poor Growth Score of F, though it is doing a bit better on the momentum front with a D. The stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

The company's stock is suitable solely for value investors based on our style scores.

Outlook

Notably, the stock has a Zacks Rank #2 (Buy). We are looking for an above average return from the stock in the next few months.




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