Why Is Annaly (NLY) Down 1.1% Since Last Earnings Report?

It has been about a month since the last earnings report for Annaly Capital Management (NLY). Shares have lost about 1.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Annaly due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Annaly Earnings & NII Beat Estimates in Q2, BVPS Up

Annaly reported second-quarter 2020 core earnings, excluding premium amortization adjustment (PAA), of 27 cents per share, outpacing the Zacks Consensus Estimate of 23 cents. Moreover, the figure compared favorably with the year-ago quarter’s 25 cents.

NII was $398.8 million, surpassing the Zacks Consensus Estimate of $205 million. It also compared favorably with the year-ago quarter’s $117.4 million.

The recovery in the MBS sector, an accommodative monetary policy and fiscal relief supported the company’s performance. The company also registered sequential improvement in book value per share.

Quarter in Detail

Its Agency portfolio totaled $96.3 billion as of Jun 30, 2020. This increased around 5% from the first quarter end. Moreover, at second-quarter 2020 end, unencumbered assets stood at $7.9 billion.

In the reported quarter, average yield on interest-earning assets (excluding PAA) was 3.01%, up from the prior quarter’s 2.91%.

Moreover, net interest spread (excluding PAA) of 1.72% for the second quarter rose from 1% reported in the prior quarter. Net interest margin (excluding PAA) in the quarter was 1.88% compared with 1.18% witnessed in first-quarter 2020.

Also, Annaly’s BVPS was $8.39 as of Jun 30, 2020, sequentially up 11.9%. However, book value per share compared unfavorably with $9.33 as of Jun 30, 2019. At the end of the June-end quarter, the company’s capital ratio was 13%, up from 12.3% reported at the end of first-quarter 2020.

Economic leverage was 6.4:1 as of Jun 30, 2020, down from 6.8:1 as of Mar 31, 2020. The company offered an annualized core return on average equity (excluding PAA) of 12.82% in the April-June period, up from the prior quarter’s 9.27%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 10.87% due to these changes.

VGM Scores

At this time, Annaly has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Annaly has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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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.


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