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AGNC Investment (AGNC) Q1 Earnings Beat on Higher Asset Yield

AGNC Investment Corp.’s AGNC first-quarter 2024 net spread and dollar roll income per common share (excluding estimated "catch-up" premium amortization benefit) of 58 cents beat the Zacks Consensus Estimate of 56 cents. However, the bottom line declined from the 60 cents reported in the previous quarter.

Adjusted net interest and dollar roll income of $496 million moved down from $497 million in the previous quarter.

The company reported first-quarter comprehensive income per common share of 48 cents compared with $1 in the prior quarter.

Inside the Headlines

Net interest expenses were $30 million compared with $26 million in the prior quarter. The Zacks Consensus Estimate was pegged at $386 million.

AGNC Investment's average asset yield on its portfolio was 4.56% in the first quarter, up from 4.47% reported in the prior quarter.

The combined weighted average cost of funds, inclusive of interest rate swap, was 1.58% compared with 1.39% in the prior quarter.

The average net interest spread (excluding estimated "catch-up" premium amortization benefits) was 2.98%, down from 3.08% in the previous quarter.

As of Mar 31, 2024, AGNC’s average tangible net book value "at risk" leverage ratio was 7X compared with 7.4X in the prior quarter.

In the first quarter, the company's investment portfolio bore an average actual constant prepayment rate of 5.7%, down from 6.2% in the previous quarter.

As of Mar 31, 2024, tangible net book value per common share (BVPS) was $8.84, up from $8.70 as of Dec 31, 2023.

The economic return on tangible common equity was 5.7%. In the previous quarter, the metric was 12.1%. This included a dividend per share of 36 cents and an increase of 14 cents in tangible net BVPS.

As of Mar 31, 2024, the company’s investment portfolio aggregated $63.3 billion. This included $53.7 billion of Agency mortgage-backed securities, $8.4 million of net forward purchases of Agency MBS in the to-be-announced market and $1.1 billion of credit risk transfer and non-Agency securities and other mortgage credit investments.

As of Mar 31, 2024, AGNC Investment’s cash and cash equivalents totaled $505 million, down from $518 billion as of Dec 31, 2023.

Dividend Update

In the first quarter, AGNC Investment announced a dividend of 12 cents per share each for January, February and March. Notably, management declared $13.1 billion in common stock dividends or $47.56 per common share since its initial public offering in May 2008 through first-quarter 2024.

Conclusion

AGNC’s first-quarter results benefited from an increase in asset yields. In a bid to navigate the monetary policy transition, the company has defensively positioned itself with prudent asset-selection efforts and timely portfolio adjustment. However, lower net interest spread, coupled with increased combined weighted average cost of funds, acted as headwinds.

AGNC Investment Corp. Price, Consensus and EPS Surprise

 

AGNC Investment Corp. Price, Consensus and EPS Surprise
AGNC Investment Corp. Price, Consensus and EPS Surprise

AGNC Investment Corp. price-consensus-eps-surprise-chart | AGNC Investment Corp. Quote

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

Upcoming Releases Dates of Other REITs

Annaly Capital Management, Inc. NLY is slated to announce first-quarter 2024 results on Apr 24.

Over the past month, the Zacks Consensus Estimate for NLY’s quarterly earnings has been revised downward by 1.5% at 64 cents per share, suggesting a 21% decline from the prior-year reported figure.

Starwood Property Trust, Inc. STWD is slated to post quarterly results on May 8.

Over the past month, the Zacks Consensus Estimate for STWD’s quarterly earnings has been unchanged at 46 cents per share, indicating a decline of 6.1% from the prior-year quarter’s reported figure.

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