Annaly Capital Misses Q1 Earnings, Beats Revenues

Annaly Capital Management, Inc. (NLY - Snapshot Report) – the mortgage real estate investment trust (mREIT) – reported first-quarter 2015 core earnings of 25 cents per share, missing the Zacks Consensus Estimate by 5 cents.  However, the bottom line came in 2 cents higher than the prior-year ago quarter figure.

Annaly Capital Management Inc. - Earnings Surprise | FindTheCompany

Net interest income (“NII”) in the quarter totaled $389.8 million, down 26.6% year over year, but comfortably surpassing the Zacks Consensus Estimate of $347 million.

Quarter in Detail

For the reported quarter, average yield on interest-earning assets was 2.47%, while average cost of interest-bearing liabilities (including interest expense on interest rate swaps) was 1.64%.

This led to net interest rate spread of 0.83% for the quarter, reflecting a 7 basis point (bps) decrease from the year-ago quarter. NIM came in at 1.26% compared with 1.32% in the year-ago period.

The company’s investment at fair value (including Agency mortgage-backed securities and Agency debentures) were $70.4 billion as of Mar 31, 2015, down from $77.8 billion as of Mar 31, 2014. The commercial investment portfolio, net of financing, denoted 13% of stockholders’ equity, as of Mar 31, 2015, up 2 bps on a sequential basis.

Annaly’s book value per share came in at $12.88 as of Mar 31, 2015, compared with $12.30 as of Mar 31, 2014. At the end of first-quarter 2015, the company’s capital ratio (representing the ratio of stockholders’ equity to total assets) was 14.1%, down 110 bps year over year.

Leverage was 5.7:1 as of Mar 31, 2015, compared with 5.2:1 as of Mar 31, 2014. The company offered an annualized core return on average equity of 7.68% in the first quarter, unchanged year over year.

Our Take

Going forward, we believe that Annaly’s diversification into commercial assets would help enhance its top-line growth.

On Apr 27, another mREIT – American Capital Agency Corp. (AGNC - Analyst Report) – reported first-quarter 2015 results. Its net spread and dollar roll income of 70 cents per share (excluding estimated "catch-up" premium amortization) exceeded the Zacks Consensus Estimate by a penny.

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