MREITs' Q2 Earnings To Watch On Aug 9: NCT, CHMI & WAC

The busy earnings season is almost over. In the mortgage real estate investment trust (“mREIT”) industry, many top-notch companies have already come out with earnings releases.

Two major companies from this industry – American Capital Agency Corp. (NASDAQ:AGNC) and Annaly Capital Management, Inc. (NYSE:NLY) have reported second-quarter 2016 results on Jul 27 and Aug 3, respectively. American Capital Agency reported net spread and dollar roll income of 56 cents per share (excluding estimated "catch-up" premium amortization benefit) that beat the Zacks Consensus Estimate of 51 cents. On the other hand, Annaly reported core earnings of 29 cents per share, down from 33 cents earned in the year-ago quarter. The Zacks Consensus Estimate for the second-quarter earnings was pegged at 29 cents.

Some mREITs which are slated to report June quarter-end results on Aug 9 are Newcastle Investment Corp. (NYSE:NCT) , Cherry Hill Mortgage Investment Corporation (NYSE:CHMI) and Walter Investment Management Corp. (NYSE:WAC) .

mREITs borrow money at a low rate of interest, and in turn use it to purchase mortgage backed securities. So, a low interest rate environment serves as a boon for the mREIT industry. During the first half of the second quarter, the chances of a rate hike kept the mREIT industry on tenterhooks. However, following the dismal jobs report in early June, chances of a hike were diminished substantially. This somewhat allayed the concerns of this industry.

Now let’s take a look at what’s in store for these mREITs which are slated to report on Aug 3.

For doing this, we rely on the Zacks methodology of combining a favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) – and a positive Earnings ESP, to predict the chances of a beat this quarter.

Our proprietary methodology, Earnings ESP, shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Research shows that with this combination of rank and ESP, chances of a positive earnings surprise are as high as 70% for the stocks.

New York-based Newcastle Investment Corp is engaged in investing in real estate securities and other real estate-related assets. The company has an Earnings ESP of 0.00% and a Zacks Rank #3. Our model does not conclusively predict that the company will record a positive surprise.

Cherry Hill Mortgage, the Moorestown, NJ-based company focuses on acquiring, investing in and managing residential mortgage assets. The company has an Earnings ESP of 0.00% and a Zacks Rank #3. Our model does not conclusively predict that the company will record a positive surprise.

Tampa, FL-based Walter Investment Management Corp. is a mortgage servicer, which specializes in subprime, non-conforming and other credit challenged mortgage assets. The company has an Earnings ESP of 0.00% and a Zacks Rank #3. Our model does not conclusively predict that the company will record a positive surprise.

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