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Annaly's (NLY) Q1 Earnings & Revenues Miss Estimates

Annaly Capital Management, Inc.NLY - the mortgage real estate investment trust (mREIT) - reported first-quarter 2016 normalized core earnings of 30 cents per share, down from 34 cents earned in the year-ago quarter. The Zacks Consensus Estimate for the first-quarter earnings was pegged at 32 cents. Net interest income ("NII") in the quarter totaled $240.7 million, down 38.2% year over year. Further, the figure lagged the Zacks Consensus Estimate of $271.8 million.

Quarter in Detail

For the reported quarter, average yield on interest-earning assets was 2.09%, while average cost of interest-bearing liabilities (including interest expense on interest rate swaps) was 1.73%.

This led to a net interest rate spread of 0.36% for the quarter, reflecting a year-over-year decrease of 54 basis points (bps). NIM came in at 0.79% compared with 1.29% in the year-ago period.

The company's investment at fair value (including Agency mortgage-backed securities and Agency debentures) was $65.6 billion as of Mar 31, 2016, down from $70.4 billion as of Mar 31, 2015.

Annaly's book value per share came in at $11.61 as of Mar 31, 2016, compared with $12.88 as of Mar 31, 2015. At the end of first-quarter 2016, the company's capital ratio (representing the ratio of stockholders' equity to total assets) was 13.2%, down from 14.3% at the end of first-quarter 2015.

Leverage was 5.3:1 as of Mar 31, 2016, compared with 4.8:1 as of Dec 31, 2015. The company offered an annualized core return on average equity of 4.19% in first-quarter 2016, down from 7.69% in the year-ago quarter.

Our Take

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

Another mREIT - American Capital Agency Corp. AGNC - reported first-quarter 2016 net spread and dollar roll income of 52 cents per share (excluding estimated "catch-up" premium amortization benefit) that missed the Zacks Consensus Estimate of 57 cents. The reported figure also came lower than 54 cents earned in the prior quarter.

While Annaly currently carries a Zacks Rank #3 (Hold), American Capital Agency holds a Zacks Rank #4 (Sell).

Investors interested in the mREIT industry may consider stocks like Great Ajax Corp AJX and New Residential Investment Corp. NRZ , both holding a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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