AGNC Investment (AGNC) Breezes Past Estimates In Q1 Earnings

AGNC Investment Corp. (NASDAQ:AGNC) reported first-quarter 2017 net spread and dollar roll income of 64 cents per share (excluding estimated "catch-up" premium amortization benefit), comfortably beating the Zacks Consensus Estimate of 58 cents. The prior-quarter figure was also 64 cents per share.

First quarter comprehensive income per common share was 35 cents against a loss of $1.19 recorded in the prior quarter.

The economic return on tangible common equity for the company during the quarter was 1.8%. This reflected dividend per share of 54 cents and a fall of 19 cents in net book value per share.

As of Jan 31, 2017, the company’s net book value per share was $20.98, down from $21.17 as of Dec 31, 2016. This fall was attributed to the underperformance of agency mortgage-backed securities (MBSs) relative to interest rate hedges in the quarter.

Notably, net interest income (NII) of $198 million came in lower than the prior-quarter figure of $295 million.

Inside the Headlines

As of Mar 31, 2017, the company’s investment portfolio aggregated $59.5 billion of agency MBS, to-be-announced (TBA) securities and credit risk transfer (CRT) securities and other non-agency securities. This included $14.4 billion of TBA mortgage position and $0.4 billion of CRT securities and other non-agency securities.

Inclusive of its net TBA position and net payable/(receivable) for unsettled securities, AGNC Investment’s “at risk” leverage ratio was 8.0x as of Mar 31, 2017, up from 7.7x as of Dec 31, 2016. For the first quarter, the company’s investment portfolio bore a weighted-average constant repayment rate of 10.7%, down from 14.3% as of Dec 31, 2016.

Average asset yield on its "balance sheet funded assets" (investment portfolio excluding the net TBA position) was 2.68% for the first quarter of 2017, down from 3.43% in the prior quarter. Moreover, combined annualized net interest rate spread on the company’s balance sheet and dollar roll funded assets for the quarter was 1.44 % compared with 2.02% in the prior quarter.

Also, as of Mar 31, 2017, AGNC Investment’s cash and cash equivalents totaled around $1.07 billion, down from $1.21 billion as on Dec 31, 2016.

Dividend Update

In the first quarter, AGNC Investment declared monthly dividends of 18 cents per share for January, February and March. The company disbursed a total of $6.9 billion in common dividends or $35.54 per common share, since its initial public offering in May 2008.

Conclusion

We expect AGNC Investment to remain range-bound in the near term, given the current market volatility. The company’s concerted measures to reposition its portfolio for meeting the current rate environment are expected to help it sail through the difficult times.

AGNC Investment currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of Annaly Capital Management, Inc. (NYSE:NLY) , Vornado Realty Trust (NYSE:VNO) and HCP, Inc. (NYSE:HCP) , which are expected next week.

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