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Annaly (NLY) Beats Q4 Earnings Estimates, Slips on Lower NII
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Annaly Capital Management, Inc. (NLY - Free Report) reported fourth-quarter 2018 core earnings, excluding premium amortization adjustment (PAA), of 29 cents per share, surpassing the Zacks Consensus Estimate of 28 cents. However, the figure compares unfavorably with the year-ago tally of 31 cents.
Shares of the company declined 1.2% in single-day trading, following the release of fourth-quarter 2018 results. It is most likely that investors didn't find much optimism with the sequential decline in its quarterly net interest income (NII).
In fact, NII totaling $272.9 million, witnessed a sequential decline of around 13.5% in the fourth quarter.
For full-year 2018, core earnings, excluding PAA of $1.20 surpassed the Zacks Consensus Estimate of $1.18. However, the figure compares unfavorably with the year-ago tally of $1.22. Further, NII for the year declined 3.6% year over year to $1.4 billion.
Quarter in Detail
In the reported quarter, average yield on interest-earning assets (excluding PAA) was 3.38%, up from 3.22% recorded in the previous quarter.
Net interest spread (excluding PAA) of 1.16% for the fourth quarter edged down from 1.14% reported in the prior quarter. Net interest margin (excluding PAA) in the quarter came in at 1.49% compared with 1.50% witnessed in the previous quarter.
The company’s investment at fair value of Agency mortgage-backed securities was around $90.7 million as of Dec 31, 2018, up from roughly $89.3 million as of Sep 30, 2018.
Further, Annaly’s book value per share came in at $9.39 as of Dec 31, 2018, compared with $10.03 as of Sep 30, 2018. At the end of the fourth quarter, the company’s capital ratio was 12.1%, down from 12.6% reported at the end of the last quarter.
Leverage was 6:3:1 as of Dec 31, 2018, compared with 5:9:1 as of Sep 30, 2018. The company offered an annualized core return on average equity of 11.48% in the Dec-end quarter, up from 10.85% in the prior quarter.
Our Take
In 2018, Annaly continued portfolio diversification by originating and purchasing more than $4.2 billion in investments, indicating a year-over-year increase of 65%. With majority of its portfolio in the form of high-quality (AA+ or better) MBS and short-term investments, Annaly is well poised to ride on growth curves. Further, at the end of 2018, the company had $7.7 billion in unencumbered assets. This indicated Annaly’s strong liquidity position. In addition, balance-sheet strength will support opportunistic portfolio expansion for the company.
However, persistent rise in interest expense is impacting Annaly’s NII growth. Furthermore, interest-rate volatility has impacted the company’s book value.
Annaly Capital Management Inc Price, Consensus and EPS Surprise
AGNC Investment Corp. (AGNC - Free Report) reported fourth-quarter 2018 net spread and dollar-roll income (excluding estimated catch-up premium amortization benefit) of 53 cents per share, missing the Zacks Consensus Estimate of 61 cents. Moreover, it came in lower than the prior-year figure of 62 cents per share.
Alexandria Real Estate Equities, Inc. (ARE - Free Report) recorded fourth-quarter 2018 adjusted FFO of $1.68 per share, missing the Zacks Consensus Estimate by a whisker.
Boston Properties Inc.’s (BXP - Free Report) fourth-quarter 2018 FFO per share of $1.59 also missed the Zacks Consensus Estimate of $1.68. The figure, however, came in 7% higher than the prior-year tally.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
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Annaly (NLY) Beats Q4 Earnings Estimates, Slips on Lower NII
Annaly Capital Management, Inc. (NLY - Free Report) reported fourth-quarter 2018 core earnings, excluding premium amortization adjustment (PAA), of 29 cents per share, surpassing the Zacks Consensus Estimate of 28 cents. However, the figure compares unfavorably with the year-ago tally of 31 cents.
Shares of the company declined 1.2% in single-day trading, following the release of fourth-quarter 2018 results. It is most likely that investors didn't find much optimism with the sequential decline in its quarterly net interest income (NII).
In fact, NII totaling $272.9 million, witnessed a sequential decline of around 13.5% in the fourth quarter.
For full-year 2018, core earnings, excluding PAA of $1.20 surpassed the Zacks Consensus Estimate of $1.18. However, the figure compares unfavorably with the year-ago tally of $1.22. Further, NII for the year declined 3.6% year over year to $1.4 billion.
Quarter in Detail
In the reported quarter, average yield on interest-earning assets (excluding PAA) was 3.38%, up from 3.22% recorded in the previous quarter.
Net interest spread (excluding PAA) of 1.16% for the fourth quarter edged down from 1.14% reported in the prior quarter. Net interest margin (excluding PAA) in the quarter came in at 1.49% compared with 1.50% witnessed in the previous quarter.
The company’s investment at fair value of Agency mortgage-backed securities was around $90.7 million as of Dec 31, 2018, up from roughly $89.3 million as of Sep 30, 2018.
Further, Annaly’s book value per share came in at $9.39 as of Dec 31, 2018, compared with $10.03 as of Sep 30, 2018. At the end of the fourth quarter, the company’s capital ratio was 12.1%, down from 12.6% reported at the end of the last quarter.
Leverage was 6:3:1 as of Dec 31, 2018, compared with 5:9:1 as of Sep 30, 2018. The company offered an annualized core return on average equity of 11.48% in the Dec-end quarter, up from 10.85% in the prior quarter.
Our Take
In 2018, Annaly continued portfolio diversification by originating and purchasing more than $4.2 billion in investments, indicating a year-over-year increase of 65%. With majority of its portfolio in the form of high-quality (AA+ or better) MBS and short-term investments, Annaly is well poised to ride on growth curves. Further, at the end of 2018, the company had $7.7 billion in unencumbered assets. This indicated Annaly’s strong liquidity position. In addition, balance-sheet strength will support opportunistic portfolio expansion for the company.
However, persistent rise in interest expense is impacting Annaly’s NII growth. Furthermore, interest-rate volatility has impacted the company’s book value.
Annaly Capital Management Inc Price, Consensus and EPS Surprise
Annaly Capital Management Inc Price, Consensus and EPS Surprise | Annaly Capital Management Inc Quote
Currently, Annaly carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other REITs
AGNC Investment Corp. (AGNC - Free Report) reported fourth-quarter 2018 net spread and dollar-roll income (excluding estimated catch-up premium amortization benefit) of 53 cents per share, missing the Zacks Consensus Estimate of 61 cents. Moreover, it came in lower than the prior-year figure of 62 cents per share.
Alexandria Real Estate Equities, Inc. (ARE - Free Report) recorded fourth-quarter 2018 adjusted FFO of $1.68 per share, missing the Zacks Consensus Estimate by a whisker.
Boston Properties Inc.’s (BXP - Free Report) fourth-quarter 2018 FFO per share of $1.59 also missed the Zacks Consensus Estimate of $1.68. The figure, however, came in 7% higher than the prior-year tally.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
See Stocks Today >>