Rising earnings estimates on the back of strong second quarter
results - including a 43.8% earnings surprise - helped
Western Asset Mortgage Capital Corporation
) achieve a Zacks #1 Rank (Strong Buy) on September 15. This real
estate investment trust, which mainly invests in Agency residential
mortgage-backed securities (RMBS), reported robust results
following its initial public offering (IPO) in May.
LEGG MASON INC (LM): Free Stock Analysis Report
WESTERN AST MTG (WMC): Free Stock Analysis
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With a solid return of 19.1% since its debut on the exchange on May
11 and an initial dividend 38 cents per share for the 47-day period
ending June 30, 2012, this stock offers an attractive investment
The Rank Driver
Better-than-expected second quarter earnings, promising growth
prospects, well balanced portfolio and leverage rate are the
primary rank drivers for this stock. Moreover, the company
possesses upside potential since it is externally managed and
advised by Western Asset Management Company, a wholly-owned
subsidiary of the reputed
Legg Mason Inc.
Western Asset Mortgage Capital reported solid second quarter 2012
results on August 13, 2012. The company, which just had 47 days
following its IPO in the quarter ended June 30, 2012 with core
earnings of $4.8 million or 47 cents per share.
Western Asset Mortgage Capital, through its successfully completed
IPO and concurrent private placements, raised more than $200
million in equity. On a GAAP basis, the company reported net income
of $4.3 million or 41 cents per share. As of June 30, 2012, net
book value was $20.17.
Net interest income for the period was $6.1 million while its
annualized net interest spread was 2.66%. Furthermore, Western
Asset Mortgage Capital enjoyed 2.45% weighted average net interest
spread, including IO securities and swaps.
Repurchase agreements have been entered into by Western Asset
Mortgage Capital with nine counterparties, providing in excess of
$1.9 billion in available financing. Leverage as of June 30, 2012
stood at 8.3x.
Earnings Estimate Revisions
The Zacks Consensus Estimate for 2012 increased 12.1% to $1.95 per
share over the last 60 days. For 2013, the Zacks Consensus Estimate
went north by 6.4% to $3.01 per share over the same time frame.
Western Asset Mortgage Capital currently trades at a forward P/E of
11.3x, a 16.3% premium to the peer group average of 9.72x. Given
the company's strong fundamentals, the premium valuation is
About the Company
Based in Pasadena, California, Western Asset Mortgage Capital
Corporation is a REIT which is involved in investing, financing,
and managing agency RMBS. Moreover, it invests in commercial
mortgage-backed securities. The company has a market capitalization
of roughly $228.0 million.