A month has gone by since the last earnings report for Annaly Capital Management (NLY Quick QuoteNLY - Free Report) . Shares have added about 2.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Annaly due for a pullback? 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 drivers.

Annaly Q1 Earnings & NII Beat, Book Value Up

Annaly reported first-quarter 2021 core earnings, excluding PAA, of 29 cents per share that surpassed the Zacks Consensus Estimate of 26 cents. Moreover, the figure compared favorably with the year-ago quarter’s 21 cents.

NII was $687.4 million, surpassing the Zacks Consensus Estimate of $408 million. Also, it compared favorably with the year-ago quarter’s $51.1 million.

While continued record-low financing costs supported Annaly, a fall in average yield on interest-earning assets was spoilsport. Nonetheless, the company registered a sequential improvement in book value per share (BVPS).

In the reported quarter, Annaly entered a definitive agreement with Slate Asset Management L.P. to sell its commercial real estate business for $2.33 billion. This will reduce exposure to the commercial real estate sector and provide the capacity to increase investments in the residential mortgage finance market.

Inside the Headlines

As of the first-quarter end, the company had $104 billion of total assets, which included $92.6 billion in a highly liquid Agency portfolio. Moreover, at the first-quarter 2021 end, unencumbered assets stood at $8.9 billion.

Markedly, Annaly doubled its capital allocation to residential credit business to 13% in the first quarter, backed by $1.4 billion of accretive securities and whole-loan purchases.

In the reported quarter, average yield on interest-earning assets (excluding PAA) was 2.71%, down from the prior quarter’s 2.80%.

Moreover, net interest spread (excluding PAA) of 1.84 % for the first quarter declined from 1.93% in the prior quarter. Net interest margin (excluding PAA) in the reported quarter was 1.91% compared with 1.98% witnessed in fourth-quarter 2020.

Annaly’s BVPS was $8.95 as of Mar 31, 2021, sequentially up from $8.92. Also, BVPS compared favorably with $7.50 as of Mar 31, 2020. At the end of the reported quarter, the company’s capital ratio was 13.7%, marginally up from 13.6% in the prior quarter.

For the March-end quarter, weighted average actual constant prepayment rate was 23.9%, sequentially down from 24.7%.

Economic leverage was 6.1X as of Mar 31, 2021, slightly down from 6.2X in the previous quarter. The company generated an annualized core return on average equity (excluding PAA) of 12.53 % in the January-March period, down from the prior quarter’s 13.03%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Annaly has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Annaly has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.