Can Arbor Realty (ABR) Retain Its Beat Streak in Q1 Earnings?

Zacks Equity Research

April 30, 2024 at 12:30 p.m.·3 min read

Arbor Realty Trust ABR is scheduled to report first-quarter 2024 results on May 3, before market open. The company is expected to have witnessed year-over-year declines in interest income and earnings.

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 of 51 cents, surpassing the Zacks Consensus Estimate of 48 cents. Net servicing revenues were $33.07 million in the quarter.

Over the trailing four quarters, Arbor Realty surpassed the Zacks Consensus Estimate on all four occasions, the average surprise being 20.8%. The graph below depicts this surprise history:

Arbor Realty Trust Price and EPS Surprise

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

Factors at Play

The mREIT sector was under pressure in the first quarter due to high volatility in the fixed-income markets. Nonetheless, the spread between the 30-year Agency MBS and 10-year treasury rate was relatively stable. This is expected to have aided the book values of the industry players.

New Agency loan originations in the first quarter are expected to have expanded the company’s fee-based servicing portfolio, driving servicing revenues. The consensus mark for ABR's first-quarter 2024 net servicing revenues is pegged at $34.21 million, indicating a 3.4% sequential rise.

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 first quarter despite the challenging economic environment.

In the first quarter, the 30-year fixed-mortgage rates increased to 6.79% from 6.61% as of the fourth-quarter 2023 end, indicating low prepayment speed. The climb in mortgage rates, which kept home buyers on the sidelines, led to a smaller origination market, both purchase and refinancing, than that reported in the prior-year quarter.

Lower levels of refinancing are anticipated to have reduced prepayment speed and driven asset yields. This is expected to have boosted net interest income in the quarter.

The consensus estimate for first-quarter interest income is pinned at $309.4 million, suggesting a 5.6% year-over-year decline.

The consensus estimate for first-quarter revenues from mortgage servicing rights is pinned at $12.49 million, suggesting a 40.9% sequential decline.

Lastly, there was a lack of any solid catalyst that could instill optimism prior to the first-quarter earnings release. The Zacks Consensus Estimate for ABR's quarterly earnings has been revised 2.2% downward to 44 cents over the past month, suggesting a year-over-year decline of 29%.

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 are reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Arbor Realty is -4.55%.

Zacks Rank: ABR currently carries a Zacks Rank of 4 (Sell).

Stocks That Warrant a Look

Here are two stocks from the broader REIT sector — DiamondRock Hospitality DRH and Omega HealthcareInvestors OHI— that you may want to consider, as our model shows that these have the right combination of elements to report a surprise this quarter.

DiamondRock Hospitality is slated to report quarterly numbers on May 2. DRH presently has an Earnings ESP of +2.06% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Omega Healthcare is scheduled to report quarterly numbers on May 2. OHI currently has an Earnings ESP of +1.85% and a Zacks Rank of 3.

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

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

Omega Healthcare Investors, Inc. (OHI) : Free Stock Analysis Report

Arbor Realty Trust (ABR) : Free Stock Analysis Report

DiamondRock Hospitality Company (DRH) : Free Stock Analysis Report

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STOCKS JUMP AFTER U.S. INFLATION REPORT RELEASE

Arbor Realty Trust Price and EPS Surprise

Factors at Play

Here is What Our Quantitative Model Predicts

Stocks That Warrant a Look

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