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What's in Store for New York Mortgage Trust (NYMT) Q3 Earnings?

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New York Mortgage Trust, Inc. (NYMT - Free Report) is scheduled to report third-quarter 2019 results on Nov 5, after the market closes. While its revenues in the third quarter are expected to have improved year over year, earnings are likely to display a decline.

In the last reported quarter, this mortgage real estate investment trust (mREIT) posted net income per share of 8 cents, missing the Zacks Consensus Estimate of 16 cents. Nonetheless, net interest income of $25.7 million missed the Zacks Consensus Estimate of $14.9 million.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on two occasions for as many misses. It reported an average negative surprise of 18.2% during this period. The graph below depicts this surprise history:

New York Mortgage Trust, Inc. Price and EPS Surprise

Let’s see how things are shaping up prior to this announcement.

While U.S. Treasury rates continued to fall across maturities in the third quarter, different parts of the yield curve inverted during this period. At the end of the quarter, the three-month rate stood at 1.88%, down from the 2.12% reported at the second-quarter end, while the 30-year rate ended at 2.12% as compared to the 2.52% recorded at the end of June.

Further, substantial decline in the 10-year yield and the Fed rate cuts have resulted in lower mortgage rates. Specifically, the 30-year mortgage rates declined from 3.75% in the week ended Jul 3, 2019 to 3.64% in the week ended Sep 26, 2019.

Supported by the above-mentioned factors, the U.S. housing market is expected to have picked up pace during the quarter. With this, mortgage REITs are anticipated to have witnessed expansion of production pipelines, driven by strong origination activities. Given the prevalent low-mortgage rates, refinancing activities shot up in the third quarter, along with rise in originations.

With mortgage rates at their three-year lows, elevated levels of originations in the market are likely to have escalated mortgage loan origination fees for New York Mortgage Trust in the to-be-reported quarter.

In addition, amid low-rate environment, the company continues to churn its investments in mortgage-backed securities by reducing exposure to agency markets. This might have cushioned the company’s performance in the to-be-reported quarter. Furthermore, third-quarter 2019 revenues are pegged at $36.2 million, reflecting year-on-year (y/y) jump of around 85%.

Also, the company’s focus on multi-family credit is beneficial as multi-family is an attractive asset class with long-term secular demand. This is supported by reduced home ownership rates, availability of GSE financing and highly-liquid asset class with stable demand through economic cycles.

However, prior to the third-quarter earnings release, there is lack of any solid catalyst for becoming overtly optimistic about the company’s business activities and prospects. As such, the Zacks Consensus Estimate for the July-September quarter’s EPS remained unrevised at 16 cents. Moreover, it represents y/y decline of 20%.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for New York Mortgage Trust this time around. The combination of a positive  Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earning ESP: New York Mortgage Trust's Earnings ESP is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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 That Warrant a Look

Summit Hotel Properties, Inc. (INN - Free Report) , set to release quarterly numbers on Nov 5, has an Earnings ESP of +0.54% and carries a Zacks Rank of 3, currently.

Senior Housing Properties Trust , slated to report July-September quarter results on Nov 7, has an Earnings ESP of +3.23% and currently holds a Zacks Rank of 2.

Douglas Emmett, Inc. (DEI - Free Report) , scheduled to release earnings results on Nov 5, has an Earnings ESP of +4.85% and carries a Zacks Rank of 3, at present.

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