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Why Is Annaly (NLY) Down 1.8% Since Last Earnings Report?

·3 min read

It has been about a month since the last earnings report for Annaly Capital Management (NLY). Shares have lost about 1.8% in that time frame, outperforming the S&P 500.

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

Annaly Q1 Earnings Top Estimates, NII & Book Value Slide

Annaly reported first-quarter 2022 earnings available for distribution (EAD) per share of 28 cents, which surpassed the Zacks Consensus Estimate of 23 cents. The figure, however, compared unfavorably with the year-ago quarter’s 29 cents.

Annaly registered a year-over-year decline in book value per share (BVPS) and the average yield on interest-earning assets.

The NII was $580.9 million, surpassing the Zacks Consensus Estimate of $341 million. The figure declined 15.5% year over year.

Inside the Headlines

At the first-quarter end, Annaly had $84.4 billion of total assets, with $76.1 billion invested in the Agency portfolio. At the end of the quarter, unencumbered assets stood at $7.2 billion.

In the reported quarter, the average yield on interest-earning assets (excluding premium amortization adjustment or PAA) was 2.62%, down from the prior-year quarter’s 2.71%. Average economic costs of interest-bearing liabilities were 0.89%, increasing from 0.87%.

Net interest spread (excluding PAA) of 1.73% for the first quarter fell from 1.84% in the prior-year quarter. Nonetheless, the net interest margin (excluding PAA) in the reported quarter was 2.04% compared with 1.91% witnessed in first-quarter 2021.

Annaly’s BVPS was $6.77 as of Mar 31, 2022, sequentially down from $7.97. Moreover, BVPS compared unfavorably with $8.95 as of Mar 31, 2021. At the end of the reported quarter, Annaly’s economic capital ratio was 13.1%, declining from 13.7% in the prior-year quarter.

For the March-end quarter, the weighted average actual constant prepayment rate was 16.7%, sequentially down from 21.4%.

Economic leverage was 6.4X as of Mar 31, 2022, up from 5.7X (sequentially) and 6.1X in the prior-year quarter. Annaly generated an annualized EAD return on average equity (excluding PAA) of 14.01% in the first quarter, up from the prior-year quarter’s 12.53%.


How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

The consensus estimate has shifted 11.11% due to these changes.

VGM Scores

Currently, Annaly has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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


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

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