MREITs' Q2 Earnings To Watch On Aug 3: NLY, ARR & More

As we enter into another hectic week of earnings reporting cycle, we find a lot of activity in the real estate investment trust (REIT) space too. A number of companies from the different categories of REITs such as the retail, equity and apartment have come out with the June-quarter end releases.

A bevy of mortgage REITs (“mREITs”) – a variant category of the commonplace REITs – have also declared their results. Some mREITs which are slated to report June quarter-end results on Aug 3 are Annaly Capital Management, Inc. (NYSE:NLY) , ARMOUR Residential REIT, Inc. (NYSE:ARR) , Chimera Investment Corporation (NYSE:CIM) , Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE:HASI) and Newcastle Investment Corp. (NYSE:NCT) .

mREITs borrow money at a low rate of interest, and in turn use it to purchase mortgage backed securities (MBSs). 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 Annaly primarily owns, manages and finances a portfolio of real estate related investment securities. The company has an Earnings ESP of -6.25% and a Zacks Rank #4 (Sell). The company lacks in both the requirements and our model does not predict an earnings beat.

ARMOUR Residential REIT, headquartered in Vero Beach, FL, primarily invests primarily in residential MBSs. The company has an Earnings ESP of +2.86% and a Zacks Rank #3. Our model predicts that the company will record a positive earnings surprise.

New York-based Chimera Investment Corporation invests in residential mortgage loans, residential MBSs, real estate-related securities and various other asset classes. The company has an Earnings ESP of 0.00% and a Zacks Rank #1. Our model does not conclusively predict that the company will record a positive surprise.

Hannon Armstrong Sustainable Infrastructure Capital is an Annapolis, MD-based mREIT which provides debt and equity financing for infrastructure projects. 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.

New York-based Newcastle Investment Corp invests 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.