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Factors to Impact New York Mortgage Trust's (NYMT) Q1 Earnings

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New York Mortgage Trust, Inc. (NYMT - Free Report) is scheduled to report first-quarter 2020 results on May 21, after market close. The company’s results are expected to reflect a year-over-year decline in earnings, while net interest income (NII) is expected to have increased.

In the last reported quarter, the mortgage real estate investment trust (REIT) posted net income per share of 20 cents, beating the Zacks Consensus Estimate of 19 cents. Moreover, NII was around $44 million, outpacing the consensus mark of $38 million.

Over the last four quarters, the company’s earnings surpassed the Zacks Consensus Estimate on two occasions and missed in the other two. The average negative surprise was 4.9%. The graph below depicts the surprise history:

New York Mortgage Trust, Inc. Price and EPS Surprise

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

The economic and financial impacts of the COVID-19 crisis have been affecting mortgage markets in several ways. The liquidity-driven market mayhem, triggered by the ongoing coronavirus crisis, resulted in significant dislocations in the mortgage and credit markets. Specifically, as the economic impact of the pandemic became clear, cash preservations and concerns over the failure of meeting mortgage payments resulted in a risk-off approach by investors, who started indiscriminately shedding risky assets. With investors fleeing from residential and commercial debt, the mortgage market also felt the brunt of the selloff. This resulted in pricing pressures on mortgage backed securities (MBS).

As prices of the securities declined, mREITs — which hold the securities — experienced a fall in book values. Impacts of the developments are expected to get reflected in New York Mortgage Trust’s quarterly results. Notably, the company estimates its book value per share to sequentially decline 33% for the March-ended quarter.

Additionally, with so many uncertainties in the credit markets, credit-sensitive assets and non-Agency MBS (not backed by Fannie Mae and Freddie Mac) were severely impacted, driving margin calls from repo lenders. To meet the margin calls and control leverage levels, the company is expected to have resorted to asset sales, even in unfavorable market conditions and engage in discussions with its repurchase financing counterparties to enter forbearance agreements.

On Mar 23, 2020, New York Mortgage Trust announced receiving margin calls from the repurchase agreement financing counterparties and it had met all margin calls received through Mar 20, 2020.

Additionally, in a bid to conserve capital and liquidity, the company suspended its quarterly dividends commencing with the first-quarter dividend.

Further, it bolstered its liquidity since Mar 16 by selling MBSs and receiving proceeds of $1.7 billion. Moreover, it has shrunk its outstanding repurchase agreement financing by $1.6 billion since Dec 31, 2019.

Amid these, the company’s activities during the March-end quarter were inadequate to gain analyst confidence. Consequently, the Zacks Consensus Estimate for first-quarter net loss per share is pinned at 98 cents, indicating a steep decline from the prior-year quarter’s net income per share of 21 cents.

Nonetheless, the company continued to opportunistically tap the capital markets through equity issuances, raising around $512 million during the quarter. Such capital market activities are expected to have contributed to its book value accretion in the March-end quarter.

Moreover, the company’s total-return approach and targeted investments, which complement its existing portfolio of diverse income-producing assets, will likely cushion its quarterly results.

Further, in the first quarter, the Fed lowered the federal funds rate target by 150 basis points to the current target of 0-0.25%. This is expected to have reduced portfolio debt costs, thereby expanding net interest margin.

Lastly, the Zacks Consensus Estimate for first-quarter 2020 NII is pinned at $46.5 million and indicates a year-over-year surge of 77.5%.

The company currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Stocks to Consider

Hannon Armstrong Sustainable Infrastructure Capital, Inc. (HASI - Free Report) carries a Zacks Rank of 2 at present. The estimate mark for the company’s 2021 EPS has been unchanged at $1.51 over the past month.

NexPoint Real Estate Finance, Inc. (NREF - Free Report) currently sports a Zacks Rank of 1. The consensus estimate for the company’s 2021 EPS has risen 3% to $1.77 over the past month.

Altisource Portfolio Solutions S.A. (ASPS - Free Report) carries a Zacks Rank of 2 at present. The consensus estimate for the company’s 2021 EPS has moved 8.1% upward to $1.46 over the past month.

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