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AGNC Investment (AGNC) Up 1.5% Since Last Earnings Report: Can It Continue?

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  • AGNCP

It has been about a month since the last earnings report for AGNC Investment (AGNC). Shares have added about 1.5% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is AGNC Investment due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

AGNC Investment Beats on Q2 Net Spread and Dollar Roll

AGNC Investment reported second-quarter 2021 net spread and dollar roll income (excluding estimated catch-up premium amortization costs) of 76 cents per share, beating the Zacks Consensus Estimate of 64 cents. Also, the reported figure improved from the second-quarter 2020 number of 58 cents.

Adjusted net interest and dollar roll income (excluding catch-up premium amortization) was $446 million, surpassing the Zacks Consensus Estimate of $337.9 million. The reported figure also improved from the year-ago figure of $372 million.

NII of $232 million declined 21.4% from the prior-year quarter’s $295 million.
The company reported a second-quarter comprehensive loss per common share of 97 cents against the prior quarter’s income of $1.33.

As of Jun 30, 2021, its tangible net book value per share (“BVPS”) was $16.39, down 7.5% from $17.72 as of Mar 31, 2021. Nonetheless, it compares favorably with BVPS of $14.92 as of Jun 30, 2020.

The economic loss on tangible common equity for the company in the reported quarter was 5.5%. This included a dividend per share of 36 cents and a decrease of $1.33 in tangible net BVPS.

Inside the Headlines

As of Jun 30, 2021, the company’s investment portfolio aggregated $87.5 billion. This included $58.1 billion of Agency MBS, $27.4 billion of TBA securities, and $2 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 ratio was 7.9X as of Jun 30, 2021, compared with 7.7X in the prior quarter.

For the June-end quarter, the company's investment portfolio bore a weighted average actual CPR of 25.7%, up from 24.6% witnessed in first-quarter 2021.

Excluding the net TBA position, AGNC Investment's average asset yield on its portfolio, excluding the net TBA position, was 1.73 % in the second quarter, significantly down from 3.78% recorded in the previous quarter.

For the June-end quarter, the combined average cost of funds, inclusive of interest rate swap costs, was 0.06%, up from 0.02% witnessed in the previous quarter.

Average net interest spread (excluding catch-up premium amortization) was 2.09%, up from 2% reported in the prior quarter.

As of Jun 30, 2021, AGNC Investment’s cash and cash equivalents totaled $947 million, down from $1.02 billion as of Dec 31, 2020.

Dividend Update

In the second quarter, AGNC Investment announced a dividend of 12 cents per share each for April, May and June. Notably, the company announced $10.8 billion in common stock dividends or $43.60 per common share since its initial public offering in May 2008 through second-quarter 2021.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, AGNC Investment has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, AGNC Investment has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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