Widely seen as a bellwether for mortgage REITs, AGNC Investment (AGNC) is scheduled to announce Q4 earnings results on Monday, January 26th, after market close.
The consensus EPS estimate is $0.37 (flat Y/Y) and the consensus revenue estimate is $358.75M.
Over the last 2 years, AGNC has beaten EPS estimates 38% of the time and revenue estimates 0% of the time.
Over the last 3 months, EPS estimates have seen 1 upward revision and 10 downward revisions. Revenue estimates have seen 3 upward revisions and 5 downward revisions.
Despite sluggish earnings estimates, sentiment is positive given the recent tightening in spreads and expected accretion in book value.
Book value reflects a company’s historical net worth from its balance sheet. The price-to-book ratio helps assess if a stock is undervalued or overvalued.
“Spreads tightened significantly in January following the Trump administration’s announcement of $200B of agency MBS (mortgage-backed securities) purchases by the GSEs. Further policy actions as part of the Trump administration’s focus on increasing housing affordability could drive further spread tightening,” said JPMorgan Chase in a recent research note.
“Tighter spreads increase agency MBS prices and drive TBVPS (tangible book value per share) accretion, but raise questions about go-forward ROE and dividend sustainability,” added the note.
AGNC stock has added ~10% since January 1.
“A steeper yield curve could boost NII (net interest income) if the company can maintain its investment portfolio while lowering funding costs. Lower base rates offer an opportunity to reset more recent swaps to a lower level, while higher L-T rates reduce prepayment risk,” said J.P. Morgan, maintaining its Overweight rating on the stock.
“The tone of earnings should be positive given strong book value gains in Q4, which have continued so far in January,” said UBS, adding that their key focus for earnings will be on the outlook for spreads and leverage/returns, given the tighter spread levels.
“While tighter spreads are a positive for book value, they lower available returns on incremental investments,” said the investment bank, with a Neutral rating on AGNC.
Wall Street analysts and Seeking Alpha authors grade AGNC as Buy.