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Annaly Capital (NLY) to Report Q4 Earnings: What to Expect

Zacks Equity Research

Annaly Capital Management Inc. NLY is scheduled to report fourth-quarter results on Feb 13, after the market closes. The company’s earnings per share (EPS) is expected to decline year over year.

In the last reported quarter, this mortgage real estate investment trust (REIT) posted core earnings of 30 cents per share, meeting the Zacks Consensus Estimate. However, net interest income (NII) of $315.6 million declined 5.5% sequentially.

Over the trailing four quarters, the company beat the Zacks Consensus Estimate in two occasions and met in the other two. It delivered average positive surprise of 1.7% during this period. The graph below depicts this surprise history:

Annaly Capital Management Inc Price and EPS Surprise
 

Annaly Capital Management Inc Price and EPS Surprise | Annaly Capital Management Inc Quote

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Annaly’s strategy focused to diversify investment options across its three credit businesses — residential credit, commercial real estate and middle market lending — is expected to have lent support to the company’s upcoming results.

Further, it is also anticipated to have gained from a diverse funding profile. Notably, with easy access to financing capital, the company has likely enjoyed flexibility in the opportunistic enhancement of its portfolio.

In fact, in 2018, the company expanded its capital base by nearly $2.6 billion through public equity and preferred offerings, as well as merger and acquisition consolidations. Also, Annaly ended the year with nearly $8 billion of unencumbered assets, providing it scope for further portfolio expansion in high-quality assets.

The company focused on its residential whole loans and middle-market lending portfolios in the fourth quarter. However, per the Fed’s data, market for residential real estate loans remined unfavorable in the Dec-end quarter on a sequential basis.

Additionally, a spike in fixed-income volatility, weaker U.S. economic fundamentals, government shutdown and escalating trade tensions have elevated concerns over global economies, and might act as dampeners for the company in the to-be-reported quarter.

Furthermore, an increase in interest rates, volatility and wider Agency MBS spreads in the Oct-Dec quarter is anticipated to impact Annaly’s net book value.

Lastly, Annaly’s activities during the quarter were inadequate to gain analyst confidence. Consequently, the Zacks Consensus Estimate for Q4 FFO remained unchanged at 28 cents in a month’s time. In addition, it indicates a 9.7% year-over-year decline.

Earnings Whispers

Our proven model does not conclusively show that Annaly is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. That is not the case here, as you will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earning ESP: Annaly’s Earnings ESP is 0.00%.

Zacks Rank: The company currently carries a Zacks Rank of 4 (Sell), which reduces the predictive power of ESP.

Stocks That Warrant a Look

While other players in the REIT space are lined up to report their financial results, below are three stocks, poised to beat on earnings per the proven Zacks model. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hersha Hospitality Trust HT, slated to report fourth-quarter results on Feb 25, has an Earnings ESP of +3.81% and holds a Zacks Rank of 2.

American Tower Corporation AMT, set to release earnings on Feb 27, has an Earnings ESP of +0.29% and carries a Zacks Rank of 3.

Federal Realty Investment Trust FRT, scheduled to report quarterly numbers on Feb 13, has an Earnings ESP of +1.53% and holds a Zacks Rank of 3.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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