It has been about a month since the last earnings report for Annaly Capital Management (NLY - Free Report) . Shares have added about 0.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Annaly due for a pullback? Before we dive into how investors and analysts have reacted as 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.
Annaly Beats on Higher Q2 Earnings, Lower NII Hurts
Annaly reported second-quarter 2018 core earnings, excluding premium amortization adjustment (PAA) of 30 cents per share, beating the Zacks Consensus Estimate by a whisker. Further, earnings remained flat year over year.
During the quarter, the company increased credit capital allocation from 24% in the year beginning to 28% in second-quarter 2018 with new credit investments worth $1.1 billion. However, results, to a great extent, were impacted due to lower interest income as well as higher interest expenses, and general and administrative expenses remained major headwinds.
Also, net interest income (NII) totaling $334.1 million, witnessed a sequential decline of around 35% in the second quarter.
Quarter in Detail
In the reported quarter, average yield on interest-earning assets (excluding PAA) was 3.04%, down from 3.45% reported in the previous quarter.
Net interest spread (excluding PAA) of 1.18% for the second quarter increased from 1.09% reported in the prior quarter. Net interest margin (excluding PAA) in the quarter came in at 1.56% compared with 1.52% recorded in the prior quarter.
The company’s investment at fair value of Agency mortgage-backed securities was nearly $86.6 billion as of Jun 30, 2018, down from $88.6 billion as of Mar 31, 2018.
Further, Annaly’s book value per share came in at $10.35 as of Jun 30, 2018, compared with $10.53 as of Mar 31, 2018. At the end of the second quarter, the company’s capital ratio was 13.2%, up from 13.1% reported at the end of the previous quarter.
Leverage was 6:0:1 as of Jun 30, 2018, compared with 6:1:1 as of Mar 31, 2018. The company offered an annualized core return on average equity of 11.05% in the reported quarter, up from 10.7% in the prior quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, Annaly has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Annaly has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.