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Annaly (NLY) to Make Public Offering of 75M Common Stock

Zacks Equity Research
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Annaly Capital Management, Inc. NLY recently discussed its plans to make a public offering of 75 million shares of common stock. Also, the company is giving underwriters a 30-day option to purchase up to an additional 11,250,000 shares.

Annaly plans spend the proceeds for targeted asset acquisitions under its capital-allocation policy. It will also be used for general corporate purposes, which may include trimming the company’s liabilities and working capital items. This public offering will help diversify the company’s investment options.

In fact, as part of the diversification strategy, it will allocate a chunk of stockholders’ equity in a variety of assets. It may expand its Agency, residential, commercial and corporate credit asset investments, such as middle-market corporate loans, residential mortgage loans, Agency MBS pools, adjustable rate mortgages, to-be-announced forward contracts, commercial real estate loans, and mortgage servicing rights.

Particularly, the company is focused on expanding its commercial real estate investments. This, in turn, is likely to complement its agency investments by providing long-term floating-rate cash flows to the shareholders and make it less volatile.

Amid challenging interest rate and volatile global economic environment, the company’s portfolio-diversification efforts augur well. It reduces Annaly’s dependence on a single investment or financing option, offering higher protection against net asset value fluctuations due to interest-rate changes.

Further, given management’s view of near-term growth in residential whole loans and middle-market lending portfolios, investment in these assets is a strategic fit.

Most recently, it acquired MTGE Investment Corp. by completing the pending exchange offer for all outstanding shares of common stock of MTGE. Notably, this buyout is a strategic fit, as it will provide further scale and diversification options to the company’s investment platform, increasing the number of options to 37. Moreover, Annaly will likely have 27% of its capital allocated to credit assets. This is anticipated to fortify the company’s capital base and back its long-term growth.

Also, the company has a decent surprise history. Over the trailing four quarters, Annaly’s earnings have surpassed the Zacks Consensus Estimate in three occasions and met in the other. It delivered an average positive surprise of 2.56% 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

Annaly flaunts a Zacks Rank #1 (Strong Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Key Picks

Other top-ranked stocks in the same space include Redwood Trust, Inc. RWT, Starwood Property Trust, Inc. STWD and Sutherland Asset Management Corp. SLD. While Redwood sports a Zacks Rank of 1, Starwood and Sutherland carry a Zacks Rank of 2 (Buy), at present.

Redwood’s earnings per share estimates for the current year remained unchanged at $1.78 in the past month. The stock has rallied 8.8% over the past six months.

Starwood Property’s Zacks Consensus Estimate for 2018 earnings per share remained unchanged at $2.19 over the past 60 days. Its shares have gained 5.2% in the past six months.

Sutherland’s earnings per share estimates for 2018 remained unchanged at $1.75 over the past month. Its shares have appreciated 15.3% in six months’ time.

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