Why Is AGNC Investment (AGNC) Up 4.4% Since Last Earnings Report?

A month has gone by since the last earnings report for AGNC Investment (AGNC). Shares have added about 4.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is AGNC Investment due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

AGNC Investment Q1 Net Spread and Dollar Roll Income Beat

AGNC Investment reported first-quarter 2021 net spread and dollar roll income (excluding estimated catch-up premium amortization costs) of 76 cents per share, beating the Zacks Consensus Estimate of 64 cents. Also, the reported figure improved from the first-quarter 2020 figure of 57 cents.

Adjusted net interest and dollar roll income (excluding catch-up premium amortization) was $457 million, surpassing the Zacks Consensus Estimate of $412 million. The reported figure also improved from the year-ago figure of $357 million.

NII of $528 million significantly surged from the prior-year quarter’s $65 million.

The company reported first-quarter comprehensive income per common share of $1.33 compared with the prior quarter’s $1.16.

Also, as of Mar 31, 2021, its tangible net book value per share (“BVPS”) was $17.72, up 6% from $16.71 as of Dec 31, 2020. Also, it compares favorably with BVPS of $13.62 as of Mar 31, 2020.

The economic loss on tangible common equity for the company in the reported quarter was 8.2%. This included a dividend per share of 36 cents and an increase of $1.01 in tangible net BVPS.

Inside the Headlines

As of Mar 31, 2021, the company’s investment portfolio aggregated $90.3 billion. This included $63.6 billion of Agency mortgage backed securities, $24.8 billion of to-be-announced (TBA) securities and $1.9 billion of credit risk transfer and non-Agency securities.

Inclusive of its net TBA position and net payable/ (receivable) for unsettled securities, AGNC Investment’s tangible net book value "at risk" leverage ratio was 7.7X as of Mar 31, 2021, compared with 8.5X in the prior quarter.

For the March-end quarter, the company's investment portfolio bore a weighted average actual CPR of 24.6%, down from 27.6% witnessed in fourth-quarter 2020.

Excluding net TBA position, AGNC Investment's average asset yield on its portfolio, excluding the net TBA position, was 3.78% in the first quarter, up from 1.64% recorded in the previous quarter.

For the March-end quarter, the combined average cost of funds, inclusive of interest rate swap costs, was 0.02%, down from 0.05% witnessed in the previous quarter.

Average net interest spread (excluding catch-up premium amortization) was 2%, down from 2.02% reported in the prior quarter.

Also, as of Mar 31, 2021, AGNC Investment’s cash and cash equivalents totaled $963 million, down from $1.01 billion as of Dec 31, 2020.

Dividend Update and Share Repurchase

In the first quarter, AGNC Investment announced a dividend of 12 cents per share each for January, February and March. Notably, the company announced $10.6 billion in common stock dividends or $43.24 per common share since its initial public offering in May 2008 through first-quarter 2021.

In the first quarter, it repurchased 13.4 million shares or $215 million of its common stock for an average price of $16.05 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 7.41% due to these changes.

VGM Scores

Currently, AGNC Investment has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, AGNC Investment has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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