Analyst: Donald Fandetti, CFA Date: 01/25/2007 Industry: Specialty Finance Company: American Home Mortgage Investment Corp (AHM) Rating: HOLD (2) High Risk (H) Target Price: $36.00
Back SUMMARY * AHM reported Q4'06 EPS of $1.21, below our est of $1.36 yet above consensus of $1.19. Shortfall was due to MBS mkt-to-mkt and lower portfolio income. * The quarterly dividend was boosted 6c to $1.12 and was a slight acceleration from their typical 5c hike. Mgt now expects 6c increases per qtr through '07. * Guidance for 2007 EPS was introduced at $5.40-$5.70, above consensus est's of $4.89 and representing 12% y/y growth at the mid-point. Loan origination guidance is now $68-$74 B for '07, up 21% y/y. * Credit deteriorated and the portfolio margin declined, though gain-on-sale and originations were strong in Q4. Record orig's at $16 B (see product mix herein). * Good Q4 performance, but it's an uphill battle for the stock in an environment where many residential lenders are stumbling and credit trends are weakening. * Reiterate Hold rating. Raising our 2007 EPS to $5.45 (+$0.45), 2008 to $5.72 (+$0.52), and introducing 2009 EPS of $6.00. Current div yield 13.9%.