What's in the Cards for Invesco Mortgage's (IVR) Q3 Earnings?
Invesco Mortgage Capital Inc. IVR is scheduled to report third-quarter and 2023 results on Nov 6, after market close. The company’s quarterly earnings available for distribution per common share are expected to have improved year over year.
In the last reported quarter, this mortgage real estate investment trust (mREIT), which invests in, finances and manages mortgage-backed securities (MBS) and other mortgage-related assets, posted earnings available for distribution per common share of $1.45. The metric surpassed the Zacks Consensus Estimate of $1.07. It witnessed a decline in net interest income (NII) and total expenses.
Notably, IVR has an impressive earnings surprise history. It surpassed estimates in the trailing four quarters, delivering an earnings surprise of 54.2%, on average.
INVESCO MORTGAGE CAPITAL INC Price and EPS Surprise
INVESCO MORTGAGE CAPITAL INC price-eps-surprise | INVESCO MORTGAGE CAPITAL INC Quote
Let’s see how things have shaped up prior to the third-quarter results.
Factors at Play
The mREIT sector was under pressure in the third quarter due to high volatility in the fixed-income markets. The widening of the Agency MBS spreads due to ongoing supply, elevated volatility, and MBS runoff from Federal Reserve and bank portfolios is expected to have affected the tangible book values of the industry players.
As for IVR, the company does not seem to be immune from a challenging macro backdrop. Book value is expected to have deteriorated in the third quarter due to higher rates, mortgage spread widening, an expected decline in valuations on its higher coupon Agency RMBS and a dip in premiums on the company's specified pool holdings.
The Federal Reserve raised the interest rates by another 25 basis points in the quarter under review. Thus, the policy rate reached 5-5.25% in July 2023, marking the 11th time the FOMC has hiked interest rates in a tightening process that began in March 2022. In September, the rate hike was paused. With this, interest rates reached 5.25-5.5% in third-quarter 2023, marking the highest level in around 22 years.
Given the rise in interest rates in the quarter, the company is expected to have seen higher funding costs.
Mortgage rates continued to increase in the third quarter, with the rate on a 30-year fixed mortgage reaching 7.31% in September, the highest level in nearly 23 years. The climb in mortgage rates, which kept home buyers on the sidelines, led to a smaller origination market, both purchase and refinancing, than the prior-year quarter’s reported number.
Lower levels of refinancing are anticipated to have reduced prepayment speed and alleviated pressure from IVR’s MBS holdings. This is expected to have reduced net discount accretion in the third quarter, offering scope for growth in interest income and average asset yield.
Lastly, prior to the third-quarter earnings release, there was a lack of any solid catalyst for becoming overly optimistic about the company’s business activities and prospects. The Zacks Consensus Estimate for third-quarter earnings has been unrevised at $1.40 over the past month. It suggests a rise of 0.7% from the year-ago reported figure.
Here is what our quantitative model predicts:
Invesco Mortgage does not have the right combination of two key ingredients — a positive Earnings ESP and 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 Invesco Mortgage is 0.00%.
Zacks Rank: Invesco Mortgage currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other mREITs
Annaly Capital Management, Inc. NLY reported third-quarter earnings available for distribution per average share of 66 cents, which surpassed the Zacks Consensus Estimate of 65 cents. The figure declined from $1.06 in the year-ago quarter.
NLY registered year-over-year declines in book value per share and margin, while the average yield on interest-earning assets improved.
AGNC Investment Corp.’s AGNC third-quarter 2023 net spread and dollar roll income per common share (excluding estimated "catch-up" premium amortization costs) of 65 cents beat the Zacks Consensus Estimate of 57 cents. However, the bottom line declined from 84 cents in the prior-year quarter.
AGNC’s adjusted net interest and dollar roll income (excluding estimated "catch-up" premium amortization costs) of $499 million moved down from $514 million in the quarter-ago period.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
AGNC Investment Corp. (AGNC) : Free Stock Analysis Report
INVESCO MORTGAGE CAPITAL INC (IVR) : Free Stock Analysis Report
Annaly Capital Management Inc (NLY) : Free Stock Analysis Report
