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Can Annaly (NLY) Keep Its Beat Streak Alive in Q3 Earnings?
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Annaly Capital Management Inc. (NLY - Free Report) is scheduled to report third-quarter 2022 results on Oct 26, after market close. The company’s results are expected to reflect a decline in earnings, while net interest income (NII) is likely to mirror growth from the year-ago reported figure.
In the last reported quarter, the mortgage real estate investment trust (mREIT) posted earnings available for distribution per share of 30 cents, which surpassed the Zacks Consensus Estimate of 25 cents. Results were supported by improvements in the average yield on interest-earning assets and margin. However, the company registered a year-over-year decline in book value per share (BVPS).
Annaly’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 14.3%. The graph below depicts this surprise history:
Annaly Capital Management Inc Price and EPS Surprise
On Sep 8, 2022, Annaly announced a 1-for-4 reverse stock split, effective the close of business on Sep 23, 2022, reducing third-quarter 2022 diluted shares.
The mREIT sector was under immense pressure in the third quarter due to high volatility in the fixed-income markets and the widening of the spread between the 30-year Agency MBS and 10-year treasury rate. This is expected to have affected tangible book value for industry players.
As for NLY, the company does not seem to be immune from a challenging macro backdrop. Owing to higher rates, mortgage spread widening and an expected decline in valuations on NLY’s Agency position,book value is expected to have deteriorated in the third quarter.
Amid high market volatility, the company disclosed preliminary updates on its third-quarter performance. Per the update, the company expects a BVPS share of $19.85- $20.05 (as of the third-quarter end). This indicates a decline of 15.4% (at the mid-point of the above range), whereas it reported $23.59 per common share at the second-quarter end.
The mREIT’s GAAP leverage ratio also increased to 5.8:1 as of Sep 30, 2022, from 5.4:1 as of Jun 30, 2022. Moreover, the economic leverage ratio rose to 7.1:1 from 6.6:1 over the comparable period.
Also, after witnessing record-low liability costs, expenses are likely to have increased in the third quarter amid rising rates.
Though the company’s liquidity declined slightly sequentially, it remained strong as of the third-quarter end. The company expects to have had $4.1 billion in cash and unencumbered Agency MBS and total unencumbered assets of $6 billion as of Sep 30, 2022.
As of the second-quarter end, Annaly’s Agency portfolio amounted to $74.9 billion, indicating 91% of the total assets. With the climb in mortgage rates and a slowdown in housing demand, supply is expected to have reduced, improving the backdrop for NLY’s Agency MBS in the third quarter.
In the third quarter, mortgage rates increased, with the rate on the 30-year fixed mortgage crossing the 6% mark in September. The climb in mortgage rates has led to a smaller mortgage origination market. Moreover, rising rates have discouraging refinancing activities.
Reduced levels of refinancing are anticipated to have alleviated pressure from Annaly’s MBS holdings. This is expected to have reduced net premium amortization in the third quarter, offering scope for growth in interest income and average asset yield.
The consensus estimate for third-quarter NII of $366.6 million indicates a 1.1% rise from the year-ago reported figure.
Lastly, the company’s activities in the third quarter were inadequate to gain analysts’ confidence. Consequently, the Zacks Consensus Estimate for third-quarter earnings has been revised downward to $1.03 in a month. This indicates a year-over-year decline of 8%.
Earnings Whispers
Our proven model shows that an earnings beat is likely for NLY this time around. This is because the company has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Annaly has an Earnings ESP of +3.55%.
A couple of other finance stocks, which you may want to consider as these too have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Ameriprise Financial, Inc. (AMP - Free Report) and Ares Management (ARES - Free Report) .
The Earnings ESP for Ameriprise Financial is +0.42%. AMP carries a Zacks Rank #3 at present. The company is slated to report results on Oct 25.
Ares Management is scheduled to release quarterly results on Oct 27. ARES currently has a Zacks Rank #3 and an Earnings ESP of +5.04%.
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Can Annaly (NLY) Keep Its Beat Streak Alive in Q3 Earnings?
Annaly Capital Management Inc. (NLY - Free Report) is scheduled to report third-quarter 2022 results on Oct 26, after market close. The company’s results are expected to reflect a decline in earnings, while net interest income (NII) is likely to mirror growth from the year-ago reported figure.
In the last reported quarter, the mortgage real estate investment trust (mREIT) posted earnings available for distribution per share of 30 cents, which surpassed the Zacks Consensus Estimate of 25 cents. Results were supported by improvements in the average yield on interest-earning assets and margin. However, the company registered a year-over-year decline in book value per share (BVPS).
Annaly’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 14.3%. The graph below depicts this surprise history:
Annaly Capital Management Inc Price and EPS Surprise
Annaly Capital Management Inc price-eps-surprise | Annaly Capital Management Inc Quote
On Sep 8, 2022, Annaly announced a 1-for-4 reverse stock split, effective the close of business on Sep 23, 2022, reducing third-quarter 2022 diluted shares.
Let’s see how things have shaped up prior to the third-quarter earnings announcement.
The mREIT sector was under immense pressure in the third quarter due to high volatility in the fixed-income markets and the widening of the spread between the 30-year Agency MBS and 10-year treasury rate. This is expected to have affected tangible book value for industry players.
As for NLY, the company does not seem to be immune from a challenging macro backdrop. Owing to higher rates, mortgage spread widening and an expected decline in valuations on NLY’s Agency position,book value is expected to have deteriorated in the third quarter.
Amid high market volatility, the company disclosed preliminary updates on its third-quarter performance. Per the update, the company expects a BVPS share of $19.85- $20.05 (as of the third-quarter end). This indicates a decline of 15.4% (at the mid-point of the above range), whereas it reported $23.59 per common share at the second-quarter end.
The mREIT’s GAAP leverage ratio also increased to 5.8:1 as of Sep 30, 2022, from 5.4:1 as of Jun 30, 2022. Moreover, the economic leverage ratio rose to 7.1:1 from 6.6:1 over the comparable period.
Also, after witnessing record-low liability costs, expenses are likely to have increased in the third quarter amid rising rates.
Though the company’s liquidity declined slightly sequentially, it remained strong as of the third-quarter end. The company expects to have had $4.1 billion in cash and unencumbered Agency MBS and total unencumbered assets of $6 billion as of Sep 30, 2022.
As of the second-quarter end, Annaly’s Agency portfolio amounted to $74.9 billion, indicating 91% of the total assets. With the climb in mortgage rates and a slowdown in housing demand, supply is expected to have reduced, improving the backdrop for NLY’s Agency MBS in the third quarter.
In the third quarter, mortgage rates increased, with the rate on the 30-year fixed mortgage crossing the 6% mark in September. The climb in mortgage rates has led to a smaller mortgage origination market. Moreover, rising rates have discouraging refinancing activities.
Reduced levels of refinancing are anticipated to have alleviated pressure from Annaly’s MBS holdings. This is expected to have reduced net premium amortization in the third quarter, offering scope for growth in interest income and average asset yield.
The consensus estimate for third-quarter NII of $366.6 million indicates a 1.1% rise from the year-ago reported figure.
Lastly, the company’s activities in the third quarter were inadequate to gain analysts’ confidence. Consequently, the Zacks Consensus Estimate for third-quarter earnings has been revised downward to $1.03 in a month. This indicates a year-over-year decline of 8%.
Earnings Whispers
Our proven model shows that an earnings beat is likely for NLY this time around. This is because the company has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Annaly has an Earnings ESP of +3.55%.
Zacks Rank: Annaly currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Stocks Worth a Look
A couple of other finance stocks, which you may want to consider as these too have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Ameriprise Financial, Inc. (AMP - Free Report) and Ares Management (ARES - Free Report) .
The Earnings ESP for Ameriprise Financial is +0.42%. AMP carries a Zacks Rank #3 at present. The company is slated to report results on Oct 25.
Ares Management is scheduled to release quarterly results on Oct 27. ARES currently has a Zacks Rank #3 and an Earnings ESP of +5.04%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.