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Annaly (NLY) Down 8.5% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Annaly Capital Management (NLY - Free Report) . Shares have lost about 8.5% in that time frame, underperforming the S&P 500.

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

Annaly's Q1 Earnings Meet Estimates, NII Declines Y/Y

Annaly reported first-quarter 2019 core earnings, excluding PAA, of 29 cents per share, in line with the Zacks Consensus Estimate. However, the figure compares unfavorably with the year-ago tally of 30 cents.

Further, NII totaling $218.5 million, witnessed a steep decline from the year-ago tally of $512.1 million.

Nevertheless, the company grew its portfolio by 12% primarily through the purchase of Agency MBS. It also originated or purchased more than $1 billion of credit assets during the reported quarter.

Quarter in Detail

In the first quarter, average yield on interest-earning assets (excluding PAA) was 3.45%, up from 2.99% recorded in the prior-year quarter.

Net interest spread (excluding PAA) of 1.30% for the first quarter was up from 1.09% reported in the prior-year quarter. Net interest margin (excluding PAA) in the quarter edged down to 1.51% as compared with 1.52% witnessed during the March-end 2018 quarter.

The company’s investment at fair value of Agency MBS was around $103.1 million as of Mar 31, 2019, up from roughly $90.8 million as of Dec 31, 2018.

Further, Annaly’s book value per share came in at $9.67 as of Mar 31, 2019, compared with $10.53 as of Mar 31, 2018. Nonetheless, book value per share improved from $9.39 as of Dec 31, 2018. At the end of the first quarter, the company’s capital ratio was 12%, down from 12.1% reported at the end of the fourth quarter of 2018.

Leverage was 6:1:1 as of Mar 31, 2019, compared with 6:3:1 as of Dec 31, 2018. The company offered an annualized core return on average equity of 11.59% during the January-March quarter, up from the prior quarter’s 11.48%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -13.56% due to these changes.

VGM Scores

Currently, Annaly has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Annaly has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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