A month has gone by since the last earnings report for AGNC Investment (AGNC). Shares have lost about 4.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is AGNC Investment due for a breakout? 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's Q1 Earnings Miss, Dividend Cut
AGNC Investment reported first-quarter 2019 net spread and dollar-roll income (excluding estimated catch-up premium amortization benefit) of 52 cents per share, missing the Zacks Consensus Estimate of 56 cents. Moreover, it came in lower than the prior-year figure of 60 cents per share.
NII of $164 million came in lower than the prior-year quarter figure of $225 million. Also, as of Mar 31, 2019, the company’s tangible net book value per share came in at $17.23, down from $18.63 as of Mar 31, 2018.
Nonetheless, the company reported first-quarter comprehensive income per common share of $1.22, as against comprehensive loss per common share of 53 cents posted in the prior-year quarter.
The economic return on tangible common equity for the company during the reported quarter was 7.3%. This included dividend per share of 54 cents and an increase of 67 cents in tangible net book value per share.
Inside the Headlines
As of Mar 31, 2019, the company’s investment portfolio aggregated $102.2 billion. This included $93.5 billion of agency mortgage backed securities, $7 billion of to-be-announced (TBA) securities, and $1.8 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 9.4x as of Mar 31, 2019, compared with 9x as of Dec 31, 2019.
For the January-March quarter, the company's investment portfolio bore a weighted average constant prepayment rate of 6.3%, down from the 8.6% witnessed in first-quarter 2018.
Excluding net TBA position, AGNC Investment's average asset yield on its portfolio, came in at 3.14% in the first quarter, marginally up from the 3.13% recorded in the previous quarter.
For the March-end quarter, combined average cost of funds, inclusive of interest rate swap costs, came in at 2.27%, an increase from 2.09% witnessed in the previous quarter.
Combined annualized net interest spread (excluding estimated catch- up premium amortization benefit), came in at 1.06%, down from 1.17% reported in fourth-quarter 2018.
Also, as of Mar 31, 2019, AGNC Investment’s cash and cash equivalents totaled $929 million, up from $921 million as of Dec 31, 2018.
In the January-March quarter, AGNC Investment announced monthly dividends of 18 cents per share for January, February and March. Notably, the company announced a total of $8.8 billion in common stock dividends or $39.86 per common share since its initial public offering in May 2008 through first-quarter 2019.
However, the company expects to reduce its monthly dividend to 16 cents, beginning with the dividends that will be announced in May 2019.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -10.71% due to these changes.
At this time, AGNC Investment has a subpar Growth Score of D, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
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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