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What's in the Cards for Arbor Realty (ABR) in Q4 Earnings?

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Arbor Realty Trust ABR is scheduled to report fourth-quarter and 2021 results on Feb 18, before market open. The company is expected to have witnessed year-over-year growth in the net interest income (NII), whereas its earnings are anticipated to have declined.

In the last reported quarter, the New York-headquartered real estate investment trust (REIT), which primarily focuses on originating and servicing loans for multi-family, single-family and other commercial real estate assets, posted distributable earnings per share of 47 cents, surpassing the Zacks consensus estimate of 37 cents. NII of $69.9 million surged 60% year over year.

Over the trailing three quarters, Arbor Realtysurpassed the Zacks Consensus Estimate on all occasions. The graph below depicts this surprise history:

Arbor Realty Trust Price and EPS Surprise

Arbor Realty Trust Price and EPS Surprise
Arbor Realty Trust Price and EPS Surprise

Arbor Realty Trust price-eps-surprise | Arbor Realty Trust Quote

Factors at Play

In the fourth quarter, there was an uptick in interest rate volatility due to monetary policy uncertainty, and the Fed’s decision to increase short-term rates and shift from quantitative easing to tightening. Against the backdrop, Agency mortgage-backed securities lost ground and underperformed as spreads to benchmark rates widened and valuations slipped relative to interest rate hedges.

Mortgage originations, both purchase and refinancing, continued to normalize in the fourth quarter. The origination boom in 2020, propelled by the ultra-low rates, is also making comparison difficult for the quarter. Further, mortgage rates rose in the quarter under review. This resulted in a drastic fall in mortgage origination activities, with steadily rising rates reducing refinancing levels.

Arbor Realty’s diversified investment focus on commercial real estate debt investments, mortgage servicing, and commercial mortgage-backed securities is likely to have enabled it to generate stable income in the fourth quarter despite the changing economic environment.

Multifamily mortgage loan securitization and originations in the fourth quarter are expected to have expanded the company’s fee-based servicing portfolio, thereby driving servicing revenues.

The Zacks Consensus Estimate for fourth-quarter 2021 net gain on sales, including fee-based services, is pegged at $20.3 million, indicating a sequential rise of 24%.

However, the consensus estimate for net servicing revenues is pegged at $15.2 million, suggesting a sequential fall of 24%.

A relatively favorable prepayment scenario in the quarter is likely to have alleviated pressure from NII in the quarter. The Zacks Consensus Estimate for the company’s quarterly net interest income is pegged at $139.4 million, suggesting an improvement of 62% on a year-over-year basis.

Lastly, there has been a lack of any solid catalyst that could instill optimism prior to the fourth-quarter earnings release. The Zacks Consensus Estimate for quarterly earnings has been unchanged at 40 cents over the past month. It suggests a year-over-year decline of 18.4%.

Here is what our quantitative model predicts:

Arbor Realty does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

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

Earnings ESP: The Earnings ESP for Arbor Realty is 0.00%.

Zacks Rank: American Tower currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks Worth a Look

Here are three stocks from the REIT sector — Pebblebrook Hotel Trust PEB, Life Storage, Inc. LSI and National Storage Affiliates Trust NSA — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.

Pebblebrook Hotel Trust, slated to release fourth-quarter earnings on Feb 22, has an Earnings ESP of +15.74% and a Zacks Rank of 3 at present.

Life Storage, scheduled to report quarterly numbers on Feb 24, has an Earnings ESP of +0.66% and a Zacks Rank of 3.

National Storage Affiliates Trust, slated to report quarterly numbers on Feb 22, has an Earnings ESP of +1.06% and a Zacks Rank of 2 (Buy).

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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Life Storage, Inc. (LSI) : Free Stock Analysis Report

Pebblebrook Hotel Trust (PEB) : Free Stock Analysis Report

Arbor Realty Trust (ABR) : Free Stock Analysis Report

National Storage Affiliates Trust (NSA) : Free Stock Analysis Report

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