Annaly Capital Management, Inc. NLY reported second-quarter 2019 core earnings, excluding premium amortization adjustment (PAA), of 25 cents per share, missing the Zacks Consensus Estimate by a whisker. Moreover, the figure compares unfavorably with the year-ago tally of 30 cents.
Further, net interest income (NII) totaling roughly $177.4 million, witnessed a steep decline from the year-ago tally of $334.1 million.
Nonetheless, the company increased capital allocation to Agency from 76% to 78% during the quarter. This was driven by relative value of Agency mortgage backed securities (MBS) as compared to Credit Businesses. In addition, it managed to maintain a strong liquidity position, with unencumbered assets aggregating $7.8 billion in the June-end quarter.
Quarter in Detail
In the second quarter, average yield on interest-earning assets (excluding PAA) was 3.48%, up from the prior-year quarter’s 3.07%.
Net interest spread (excluding PAA) of 1.07% for the second quarter slid from 1.18% reported in the prior-year quarter. Net interest margin (excluding PAA) in the quarter came in at 1.28% compared with 1.56% witnessed in second-quarter 2018.
The company’s investment at fair value of Agency MBS was around $118.2 million as of Jun 30, 2019, up from $86.6 million as of Jun 30, 2018.
Moreover, Annaly’s book value per share came in at $9.33 as of Jun 30, 2019, compared with $10.35 as of Jun 30, 2018. Additionally, book value per share declined from $9.67 as of the prior-quarter end. At the end of the second quarter, the company’s capital ratio was 11.4%, down from 13.2% reported at the end of second-quarter 2018.
Leverage was 7:2:1 as of Jun 30, 2019, compared with 6:0:1 as of Jun 30, 2018. The company offered an annualized core return on an average equity of 9.94% in the April-June quarter, down from the prior-year quarter’s 11.05%.
During the second quarter, Annaly made significant securitization efforts within the residential credit business by completing two residential whole loan securitizations, aggregating $772 million. Also, subsequent to the end of the quarter, it closed an additional securitization that increased aggregate issuance to $2.7 billion through seven transactions since the beginning of 2018. This apart, the company increased the number of residential whole loan origination partners by more than 25% during the April-June quarter.
Additionally, in June, the company authorized a $1.5-billion share-repurchase program, providing it additional flexibility within the company’s capital allocation framework. Hence, with balance-sheet strength, the company is well positioned to expand its portfolio efficiently.
Annaly Capital Management Inc Price, Consensus and EPS Surprise
Annaly Capital Management Inc price-consensus-eps-surprise-chart | Annaly Capital Management Inc Quote
Currently, Annaly carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other REITs
AGNC Investment Corp. AGNC reported second-quarter 2019 net spread and dollar-roll income (excluding estimated catch-up premium amortization benefit) of 49 cents per share, marginally missing the Zacks Consensus Estimate of 50 cents. Moreover, it came in lower than the prior-year figure of 63 cents per share.
Cousins Properties Incorporated CUZ posted second-quarter FFO per share (before TIER transaction costs) of 71 cents, missing the Zacks Consensus Estimate by a whisker. The figure, however, came in higher than the prior-year quarter’s reported tally of 60 cents.
SL Green Realty Corp. SLG delivered second-quarter 2019 FFO of $1.82 per share, surpassing the Zacks Consensus Estimate of $1.73. The tally includes promote income from the sale of 521 Fifth Avenue of $3.4 million or 4 cents per share. Results also compared favorably with the year-ago quarter’s tally of $1.69.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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