Annaly Capital (NLY) Issues Update Amid Coronavirus Mayhem

Annaly Capital Management, Inc. NLY recently announced that it estimates its preliminary core earnings (excluding the premium amortization adjustment, or PAA) per share of 20-21 cents for the first quarter compared with the prior quarter’s 26 cents. The Zacks Consensus Estimate for the same is pinned at 23 cents.

Moreover, the company sees a decline in its first-quarter book value. Annaly Capital estimates preliminary book value per share of $7.40-$7.60 as of Mar 31, 2020, down from $9.66 as of Dec 31, 2019. Also, on a preliminary basis, the company estimates a reduction in economic leverage to between 6.8:1 and 6.9:1 as of Mar 31, 2020, compared with 7.2:1 as of Dec 31, 2019.

This update for its business operations and portfolio management comes in light of the coronavirus pandemic and the consequent market disruption and dislocations, along with the significant liquidity reduction.

Amid substantial volatility and lack of liquidity, the company has adopted aggressive measures to sail through the current turbulence, strengthen its liquidity position and alleviate risk. Moreover, the Federal Reserve’s actions, particularly, the significant acquisitions of Agency mortgage-backed securities ("Agency MBS"), have aided in valuation improvements and the broader mortgage market.

As a result, with approximately 93% of the company’s assets as of Mar 31, 2020, comprising Agency MBS, which have seen improved liquidity and valuations, Annaly Capital remains well poised to counter the crisis.

Further, the company noted that it has proactively reduced the size of its portfolio to manage leverage profile since the beginning of the year. As such, its total portfolio was roughly $99 billion as of Mar 31, 2020, compared with $128.7 billion as of Dec 31, 2019. Accordingly, repo balance was lowered to $72.6 billion from $101.7 billion as of Dec 31, 2019.

The company focused on maintaining a solid liquidity position, and had cash and unencumbered Agency MBS of $4.6 billion and total unencumbered assets of $7.2 billion as of Mar 31, 2020. In addition, with no collateral or margining issues, repo operations have been orderly.

Annaly Capital also noted that its first-quarter 2020 common stock cash dividend of 25 cents per common share, is payable on Apr 30, 2020, to shareholders of record on Mar 31, 2020, as previously announced.

The coronavirus outbreak has been wreaking havoc on the global economy. The crisis has battered most industries, and the economic and financial consequences have adversely impacted mortgage markets.

Investors have resorted to shedding risk exposure across all asset categories and boost cash position, resulting in pricing pressure and liquidity issues in MBS markets. Also, chances of delaying or defaulting on mortgage payments by homeowners have escalated. Nevertheless, the Fed’s efforts to support the market’s smooth functioning are likely to provide some relief.

Shares of Annaly Capital, which currently carries a Zacks Rank #3 (Hold), have depreciated 39% so far in the year, narrower than its industry’s fall of 58.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

New York Mortgage Trust, Inc. NYMT currently flaunts a Zacks Rank of 1 (Strong Buy). The Zacks Consensus Estimate for the company’s earnings per share for the ongoing year moved marginally north to 77 cents over the past month.

ARMOUR Residential REIT, Inc. ARR also sports a Zacks Rank of 1, at present. The company’s earnings per share estimate for 2020 has been revised 4.7% upward to $2.25 over the past 60 days.

Plymouth Industrial REIT’s PLYM Zacks Consensus Estimate for the current-year FFO per share moved up about 2% to $2.08 over the past two months. The stock currently sports a Zacks Rank of 1.

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