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AGNC Investment (AGNC) Up 5.4% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for AGNC Investment (AGNC). Shares have added about 5.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is 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 its most recent earnings report in order to get a better handle on the important catalysts.

AGNC Investment Q1 Earnings Top Estimates, NII Down Y/Y

AGNC Investment reported first-quarter 2020 net spread and dollar-roll income (excluding estimated catch-up premium amortization cost) of 57 cents per share, beating the Zacks Consensus Estimate of 56 cents. Further, the reported figure improved from the prior year quarter’s 52 cents per share.

Net interest income (NII) of $65 million lagged the Zacks Consensus Estimate of $351.30 million. It was also lower than the prior-quarter figure of $164 million.

The company reported first-quarter comprehensive loss per common share of $13.61 as against comprehensive income per common share of $1.22 reported in the prior-year quarter.

Also, as of Mar 31, 2020, its tangible net book value per share was $13.62, down 22.9% from $17.66 as of Dec 31, 2019. Further, it compared unfavorably with the tangible net book value per share of $17.23 as of Mar 31, 2019.

The economic loss on tangible common equity for the company during the reported quarter was 20.2%. This included a dividend per share of 48 cents and a decline of $4.04 in tangible net book value per share.

Inside the Headlines

As of Mar 31, 2020, the company’s investment portfolio aggregated $93 billion. This included $70.7 billion of agency MBS, $21.2 billion of TBA securities, and $1.1 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 was 9.4x as of Mar 31, 2020, unchanged from Dec 31, 2019.

For the March-end quarter, the company's investment portfolio bore a weighted average constant prepayment rate (CPR) of 12.2%, down from 15.4% witnessed in fourth-quarter 2019.

Excluding net TBA position, AGNC Investment's average asset yield on its portfolio, excluding the net TBA position, was 2.01% in the first quarter, down from the 3.28% recorded in the previous quarter.

For the January-March period, combined average cost of funds inclusive of interest rate swap costs was 1.67%, down from 1.76% witnessed in the previous quarter.

Average net interest spread (excluding catch-up premium amortization) was 1.30%, down from 1.33% reported in the prior quarter.

Also, as of Mar 31, 2020, AGNC Investment’s cash and cash equivalents totaled around $1.3 billion, up from $831 million as of Dec 31, 2019.

Dividend Update

During the first quarter, AGNC Investment announced a monthly dividend of 16 cents per share for January, February and March, respectively. Notably, the company announced $9.9 billion in common stock dividend or $41.32 per common share since its initial public offering in May 2008 through first-quarter 2020.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -20.64% due to these changes.

VGM Scores

Currently, AGNC Investment has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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. It's no surprise AGNC Investment has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.



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