AGNC Investment (AGNC) Up 1.3% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for AGNC Investment Corp. (NASDAQ:AGNC) . Shares have added about 1.3% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is AGNC due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

AGNC Investment Q1 Earnings Miss Estimates, NII Up Y/Y

AGNC Investment reported first-quarter 2018 net spread and dollar roll income (excluding estimated catch-up premium amortization benefit) of 60 cents per share, missing the Zacks Consensus Estimate of 61 cents. Nonetheless, the figure came in higher than the prior-quarter tally of 63 cents per share.

Further, the company reported the first-quarter comprehensive loss per common share of 53 cents, against 44 cents of comprehensive income recorded in the prior quarter.

Also, as of Mar 31, 2018, the company’s tangible net book value per share came in at $18.63, down from $19.69 as of Dec 31, 2017.

The economic return on tangible common equity for the company during the reported quarter was -2.6%. This included dividend per share of 54 cents and a decrease of $1.06 in tangible net book value per share.

Nevertheless, net interest income (NII) of $225 million improved from the prior-quarter figure of $212 million.

Inside the Headlines

As of Mar 31, 2018, the company’s investment portfolio aggregated $69.3 billion. This included 68.4 billion of agency mortgage backed securities (MBS) and to-be-announced (TBA) securities, as well as $0.9 billion of credit risk transfer (CRT) and non-agency securities.

Inclusive of its net TBA position and net payable/ (receivable) for unsettled securities, AGNC Investment’s tangible net book value "at risk" leverage ratio was 8.2x as of Mar 31, 2018, against 8.1x as of Dec 31, 2017.

For the Jan-Mar quarter, the company's investment portfolio bore a weighted average constant repayment rate (CPR) of 8.6%, down from 10.1% reported in the last-reported quarter.

Excluding net TBA position, AGNC Investment's average asset yield came in at 3.05% for the reported quarter, up from 2.84% recorded in the previous quarter.

For the first quarter, combined average cost of funds inclusive of interest rate swap costs, came in at 1.68%, an increase from 1.52% witnessed in the prior quarter.

Annualized net interest margin, including TBA dollar roll income (excluding estimated catch- up premium amortization benefit), for the quarter came in at 1.26%, down from 1.36% reported in the last quarter.

Also, as of Mar 31, 2018, AGNC Investment’s cash and cash equivalents totaled around $972 million, down from $1.05 billion as of Dec 31, 2017.

Dividend Update

In the first quarter, AGNC Investment announced monthly dividends of 18 cents per share for January, February and March. Notably, the company had announced a total of $7.8 billion in common stock dividends or $37.7 per common share, since its initial public offering in May 2008 through first-quarter 2018.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. There have been three revisions higher for the current quarter. Last month, the consensus estimate has shifted by 6.7% due to these changes.

AGNC Investment Corp. Price and Consensus

VGM Scores

At this time, AGNC has a poor Growth Score of F, however its Momentum is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than value investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, AGNC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.