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Annaly (NLY) Stock Up on Q1 Earnings & NII Beat, Book Value Up

Zacks Equity Research
·3 min read

Shares of Annaly Capital Management, Inc. NLY inched up 0.7% during Apr 29 regular trading session after the company reported better-than-projected numbers for first-quarter 2021 both in terms of core earnings, excluding premium amortization adjustment (PAA), and net interest income (NII).

The company reported first-quarter 2021 core earnings, excluding PAA, of 29 cents per share that surpassed the Zacks Consensus Estimate of 26 cents. Moreover, the figure compared favorably with the year-ago quarter’s 21 cents.

NII was $687.4 million, surpassing the Zacks Consensus Estimate of $408 million. Also, it compared favorably with the year-ago quarter’s $51.1 million.

While continued record-low financing costs supported Annaly, a fall in average yield on interest-earning assets was spoilsport. Nonetheless, the company registered a sequential improvement in book value per share (BVPS).

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In the reported quarter, Annaly entered a definitive agreement with Slate Asset Management L.P. to sell its commercial real estate business for $2.33 billion. This will reduce exposure to the commercial real estate sector and provide the capacity to increase investments in the residential mortgage finance market.

Inside the Headlines

As of the first-quarter end, the company had $104 billion of total assets, which included $92.6 billion in a highly liquid Agency portfolio. Moreover, at the first-quarter 2021 end, unencumbered assets stood at $8.9 billion.

Markedly, Annaly doubled its capital allocation to residential credit business to 13% in the first quarter, backed by $1.4 billion of accretive securities and whole-loan purchases.

In the reported quarter, average yield on interest-earning assets (excluding PAA) was 2.71%, down from the prior quarter’s 2.80%.

Moreover, net interest spread (excluding PAA) of 1.84 % for the first quarter declined from 1.93% in the prior quarter. Net interest margin (excluding PAA) in the reported quarter was 1.91% compared with 1.98% witnessed in fourth-quarter 2020.

Annaly’s BVPS was $8.95 as of Mar 31, 2021, sequentially up from $8.92. Also, BVPS compared favorably with $7.50 as of Mar 31, 2020. At the end of the reported quarter, the company’s capital ratio was 13.7%, marginally up from 13.6% in the prior quarter.

For the March-end quarter, weighted average actual constant prepayment rate was 23.9%, sequentially down from 24.7%.

Economic leverage was 6.1X as of Mar 31, 2021, slightly down from 6.2X in the previous quarter. The company generated an annualized core return on average equity (excluding PAA) of 12.53 % in the January-March period, down from the prior quarter’s 13.03%.

Annaly currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Annaly Capital Management Inc Price, Consensus and EPS Surprise

Annaly Capital Management Inc Price, Consensus and EPS Surprise
Annaly Capital Management Inc Price, Consensus and EPS Surprise

Annaly Capital Management Inc price-consensus-eps-surprise-chart | Annaly Capital Management Inc Quote

We now look forward to the earnings releases of other REITs like Mack-Cali Realty Corporation CLI, Iron Mountain Incorporated IRM and Regency Centers Corporation REG, which are slated to report first-quarter results on May 6.

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Annaly Capital Management Inc (NLY) : Free Stock Analysis Report

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