A bellwether for mortgage REITs, AGNC Investment (NASDAQ:AGNC), is scheduled to announce Q3 financial results on Monday, October 20th, before market open, and the stock stands to benefit from the recent tightening in spreads despite lower expected earnings.
The consensus EPS estimate is $0.39 (-9.3% Y/Y).
Over the last 2 years, AGNC has beaten EPS estimates 50% of the time. Over the last 3 months, EPS estimates have seen 1 upward revision and 7 downward.
Last quarter, earnings fell short of the average analyst estimate as tariff news roiled markets in the spring. While most markets bounced back, agency mortgage-backed securities did not.
“Although most asset class valuations retraced the April losses and ultimately increased quarter-over-quarter, agency MBS were an exception, as spreads to benchmark rates widened moderately during the second quarter. As a result of this underperformance, AGNC’s economic return for the second quarter was -1.0%,” said CEO Peter Federico.
“Looking ahead, we expect banks and foreign demand for agency MBS to grow. In addition, as we enter the third quarter, the seasonal supply pattern for MBS issuance should improve. We expect the net supply of new MBS will be about $200 billion this year, the low end of most forecasts. Since quarter end, MBS spreads have tightened slightly and are showing signs of stabilization,” Federico had said during the second-quarter earnings call.
“We have started to see a positive shift in our mortgage universe with 30-year mortgage rates decreasing to 6.3% from 7%+ earlier in the year and agency spreads tightening materially,” said Piper Sandler analyst Crispin Love in the Q3 mortgage finance preview.
“We expect key topics on the (NASDAQ:AGNC) earnings call to be on spreads, mortgage rates, investment opportunities, and GSE reform. Going forward, we believe AGNC can maintain its current dividend level, with AGNC generating mid-to-high teens returns,” noted Love in the research note.
“We are maintaining our 3Q25 core EPS estimate of $0.38 and our 2025 and 2026 estimates of $1.57 and $1.54, respectively. However, we are increasing our 3Q25 TBV (tangible book value) estimate to $8.60 from $7.94 as agency spreads have tightened ~20 bps from mid-July to quarter end. We are also increasing our GAAP EPS estimate to $1.12 from $0.45,” said Love.
Piper Sandler raised its price target on the stock to $10.50 from $10.00, citing the action to be driven by higher tangible book value given recent spread tightening.
Ahead of the Q3 earnings release, the average Wall Street analysts’ rating on the stock stands at Buy.
On the other side, Seeking Alpha authors see the stock as Hold.
“AGNC aggressively bought up swaps when interest rates were super low. Those swaps have been maturing, and we can see AGNC’s cost of funds drift upward,” noted SA contributor Rida Morwa.
“It is important to note that through the end of 2025, the swaps expiring are going to have a larger financial impact than repo rates coming down,” said Morwa.
“For traders who buy the rumor and sell the news, AGNC is going to move quickly into the category of no longer meeting any of their interests. This year, AGNC has strongly outperformed the market on the expectation of interest rate cuts, not that they’re here, we’re seeing traders exit their positions, bringing current returns closer to that of the overall market,” noted Morwa.
“For income investors who position their portfolio to benefit regardless of what interest rates are doing, AGNC continues to be a highly attractive opportunity to collect double-digit yields paid out monthly from ultra-safe investments in agency MBS,” according to the author.
The stock has added ~8.5% year-to-date, and closed 0.71% higher at $9.99 on Friday ahead of its Q3 earnings release.