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Annaly Capital’s (NLY) Q4 Earnings In line, Decrease Y/Y


Annaly Capital Management, Inc. NLY – the mortgage real estate investment trust (mREIT) – reported fourth-quarter 2016 adjusted core earnings of 30 cents per share, in line with the Zacks Consensus Estimate. However, it came lower than 31 cents earned in the year-ago quarter.

Net interest income (NII) in the quarter totaled $623.6 million, up 36.2% year over year.

For full-year 2016, the bottom-line came in at $1.17 per share, down from $1.28 recorded in the prior-year.

For 2016, NII came in at $1.55 billion, down from $1.70 billion recorded a year ago.

Quarter in Detail

For the reported quarter, average yield on interest-earning assets was 3.81%, while average cost of interest-bearing liabilities (including interest expense on interest rate swaps) was 1.53%.

This led to a net interest rate spread of 2.28% for the quarter, reflecting a year-over-year increase of 81 basis points. Net interest margin came in at 2.49% compared with 1.80% in the year-ago period.

The company’s investment at fair value (including Agency mortgage-backed securities and Agency debentures) was $75.6 billion as of Dec 31, 2016, up from $65.9 billion as of Dec 31, 2015.

Annaly’s book value per share came in at $11.16 as of Dec 31, 2016, compared with $11.73 as of Dec 31, 2015. At the end of the fourth quarter, the company’s capital ratio (representing the ratio of stockholders’ equity to total assets) was 13.1%, down from 13.7% at the end of the prior-year quarter.

Leverage was 5.8:1 as of Dec 31, 2016, compared with 6.0:1 as of Dec 31, 2015. The company offered an annualized core return on average equity of 10.13% in the quarter, down from 10.30% 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 – AGNC Investment Corp. AGNC – reported fourth-quarter 2016 net spread and dollar roll income of 64 cents per share (excluding estimated "catch-up" premium amortization benefit) that comfortably beat the Zacks Consensus Estimate of 60 cents. The reported figure was same as the prior quarter.

While Annaly sports a Zacks Rank #1 (Strong Buy), AGNC Investment carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Annaly Capital Management Inc Price, Consensus and EPS Surprise

Annaly Capital Management Inc Price, Consensus and EPS Surprise | Annaly Capital Management Inc Quote

Two other REITs which are slated to report results next week are Welltower Inc. HCN and Host Hotels & Resorts, Inc. HST.

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