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Annaly's (NLY) Q3 Earnings Miss Estimates, Down Y/Y

Annaly Capital Management, Inc.NLY - the mortgage real estate investment trust (mREIT) - reported third-quarter 2015 core earnings of 21 cents per share, down from 31 cents earned in the year-ago quarter. The normalized core earnings per share came in at 30 cents per share, down from 33 cents earned a year ago. The Zacks Consensus Estimate for the third-quarter earnings was pegged at 31 cents.

Net interest income ("NII") in the quarter totaled $340.5 million, down 34.2% year over year. However, the figure surpassed the Zacks Consensus Estimate of $317 million.

Quarter in Detail

For the reported quarter, average yield on interest-earning assets was 2.41%, while average cost of interest-bearing liabilities (including interest expense on interest rate swaps) was 1.65%.

This led to net interest rate spread of 0.76% for the quarter, reflecting a year-over-year decrease of 59 basis points (bps). NIM came in at 1.24% compared with 1.61% in the year-ago period.

The company's investment at fair value (including Agency mortgage-backed securities and Agency debentures) were $66.2 billion as of Sep 30, 2015, down from $82.8 billion as of Sep 30, 2014. The commercial real estate and non-Agency residential credit portfolios denoted 18% of equity capital as of Sep 30, 2015, up 26% on a sequential basis.

Annaly's book value per share came in at $11.99 as of Sep 30, 2015, compared with $12.87 as of Sep 30, 2014. At the end of third-quarter 2015, the company's capital ratio (representing the ratio of stockholders' equity to total assets) was 13.7%, down from 15.0% at the end of third-quarter 2014.

Leverage was 4.8:1 as of Sep 30, 2015, compared with 5.4:1 as of Sep 30, 2014. The company offered an annualized core return on average equity of 7.0% in third-quarter 2015, down from 9.3% in third-quarter 2014.

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 third-quarter 2015 results on Oct 26. Its net spread and dollar roll income of 51 cents per share (excluding estimated "catch-up" premium amortization) missed the Zacks Consensus Estimate of 60 cents.

Both Annaly and American Capital Agency currently carries a Zacks Rank #3 (Hold). Investors interested in the mREIT industry may consider stocks like Ares Commercial Real Estate Corporation ACRE and Blackstone Mortgage Trust, Inc. BXMT , both of which sport a Zacks Rank #1 (Strong Buy).

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AMER CAP AGENCY (AGNC): Free Stock Analysis Report

ARES COMMERCIAL (ACRE): Free Stock Analysis Report

BLACKSTONE MRTG (BXMT): Free Stock Analysis Report

ANNALY CAP MGMT (NLY): Free Stock Analysis Report

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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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