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AGNC Investment (AGNC) Q1 Earnings Top Estimates, NII Down Y/Y
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AGNC Investment Corp. (AGNC - Free Report) reported first-quarter 2020 net spread and dollar-roll income (excluding estimated catch-up premium amortization cost) of 57 cents per share, beating the Zacks Consensus Estimate of 56 cents. However, the reported figure was lower than the prior quarter’s 52 cents per share.
Net interest income (NII) of $65 million lagged the Zacks Consensus Estimate of $351.30 million. It was also lower than the prior-quarter figure of $164 million.
The company reported first-quarter comprehensive loss per common share of $13.61 as against comprehensive income per common share of $1.22 reported in the prior-year quarter.
Also, as of Mar 31, 2020, its tangible net book value per share was $13.62, down 22.9% from $17.66 as of Dec 31, 2019. Further, it compared unfavorably with the tangible net book value per share of $17.23 as of Mar 31, 2019.
The economic loss on tangible common equity for the company during the reported quarter was 20.2%. This included a dividend per share of 48 cents and a decline of $4.04 in tangible net book value per share.
Inside the Headlines
As of Mar 31, 2020, the company’s investment portfolio aggregated $93 billion. This included $70.7 billion of agency mortgage backed securities (MBS), $21.2 billion of to-be-announced (TBA) securities, and $1.1 billion of credit risk transfer 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 was 9.4x as of Mar 31, 2020, unchanged from Dec 31, 2019.
For the March-end quarter, the company's investment portfolio bore a weighted average constant prepayment rate (CPR) of 12.2%, down from 15.4% witnessed in fourth-quarter 2019.
Excluding net TBA position, AGNC Investment's average asset yield on its portfolio, excluding the net TBA position, was 2.01% in the first quarter, down from the 3.28% recorded in the previous quarter.
For the January-March period, combined average cost of funds inclusive of interest rate swap costs was 1.67%, down from 1.76% witnessed in the previous quarter.
Average net interest spread (excluding catch-up premium amortization) was 1.30%, down from 1.33% reported in the prior quarter.
Also, as of Mar 31, 2020, AGNC Investment’s cash and cash equivalents totaled $1,289 million, up from $831 million as of Dec 31, 2019.
Dividend Update
During the first quarter, AGNC Investment announced a monthly dividend of 16 cents per share for January, February and March, respectively. Notably, the company announced $9.9 billion in common stock dividend or $41.32 per common share since its initial public offering in May 2008 through first-quarter 2020.
Conclusion
Amid the disruptions in the mortgage market due to the economic impacts of the coronavirus pandemic, MBS valuations witnessed a steep decline. Nonetheless, the Federal Reserve’s asset purchase initiatives in a bid to support the MBS and the broader financial market have provided support.
AGNC witnessed a significant sequential decline in its net book value per common share in the first quarter primarily due to the underperformance of its mortgage assets as compared to interest rate hedges. Further, lower valuation premiums for its higher coupon specified pool holdings contributed to the sequential decline.
Although the specified pool position impacted book value, the assets provide particularly attractive earnings opportunities, given reduced prepayment projections and greater stability of cash flows relative to generic Agency MBS.
AGNC Investment Corp. Price, Consensus and EPS Surprise
Omega Healthcare Investors, Inc. (OHI - Free Report) is slated to report first-quarter results on May 4.
Hannon Armstrong Sustainable Infrastructure Capital, Inc. (HASI - Free Report) is scheduled to release earnings on May 7.
Americold Realty Trust (COLD - Free Report) is expected to release earnings results on May 7.
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AGNC Investment (AGNC) Q1 Earnings Top Estimates, NII Down Y/Y
AGNC Investment Corp. (AGNC - Free Report) reported first-quarter 2020 net spread and dollar-roll income (excluding estimated catch-up premium amortization cost) of 57 cents per share, beating the Zacks Consensus Estimate of 56 cents. However, the reported figure was lower than the prior quarter’s 52 cents per share.
Net interest income (NII) of $65 million lagged the Zacks Consensus Estimate of $351.30 million. It was also lower than the prior-quarter figure of $164 million.
The company reported first-quarter comprehensive loss per common share of $13.61 as against comprehensive income per common share of $1.22 reported in the prior-year quarter.
Also, as of Mar 31, 2020, its tangible net book value per share was $13.62, down 22.9% from $17.66 as of Dec 31, 2019. Further, it compared unfavorably with the tangible net book value per share of $17.23 as of Mar 31, 2019.
The economic loss on tangible common equity for the company during the reported quarter was 20.2%. This included a dividend per share of 48 cents and a decline of $4.04 in tangible net book value per share.
Inside the Headlines
As of Mar 31, 2020, the company’s investment portfolio aggregated $93 billion. This included $70.7 billion of agency mortgage backed securities (MBS), $21.2 billion of to-be-announced (TBA) securities, and $1.1 billion of credit risk transfer 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 was 9.4x as of Mar 31, 2020, unchanged from Dec 31, 2019.
For the March-end quarter, the company's investment portfolio bore a weighted average constant prepayment rate (CPR) of 12.2%, down from 15.4% witnessed in fourth-quarter 2019.
Excluding net TBA position, AGNC Investment's average asset yield on its portfolio, excluding the net TBA position, was 2.01% in the first quarter, down from the 3.28% recorded in the previous quarter.
For the January-March period, combined average cost of funds inclusive of interest rate swap costs was 1.67%, down from 1.76% witnessed in the previous quarter.
Average net interest spread (excluding catch-up premium amortization) was 1.30%, down from 1.33% reported in the prior quarter.
Also, as of Mar 31, 2020, AGNC Investment’s cash and cash equivalents totaled $1,289 million, up from $831 million as of Dec 31, 2019.
Dividend Update
During the first quarter, AGNC Investment announced a monthly dividend of 16 cents per share for January, February and March, respectively. Notably, the company announced $9.9 billion in common stock dividend or $41.32 per common share since its initial public offering in May 2008 through first-quarter 2020.
Conclusion
Amid the disruptions in the mortgage market due to the economic impacts of the coronavirus pandemic, MBS valuations witnessed a steep decline. Nonetheless, the Federal Reserve’s asset purchase initiatives in a bid to support the MBS and the broader financial market have provided support.
AGNC witnessed a significant sequential decline in its net book value per common share in the first quarter primarily due to the underperformance of its mortgage assets as compared to interest rate hedges. Further, lower valuation premiums for its higher coupon specified pool holdings contributed to the sequential decline.
Although the specified pool position impacted book value, the assets provide particularly attractive earnings opportunities, given reduced prepayment projections and greater stability of cash flows relative to generic Agency MBS.
AGNC Investment Corp. Price, Consensus and EPS Surprise
AGNC Investment Corp. price-consensus-eps-surprise-chart | AGNC Investment Corp. Quote
AGNC Investment currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Releases of Other REITs
Omega Healthcare Investors, Inc. (OHI - Free Report) is slated to report first-quarter results on May 4.
Hannon Armstrong Sustainable Infrastructure Capital, Inc. (HASI - Free Report) is scheduled to release earnings on May 7.
Americold Realty Trust (COLD - Free Report) is expected to release earnings results on May 7.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>