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Why Is AGNC Investment (AGNC) Down 7.6% Since Last Earnings Report?

A month has gone by since the last earnings report for AGNC Investment (AGNC). Shares have lost about 7.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is AGNC Investment due for a breakout? 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 drivers.

AGNC Investment Beats on Q1 Net Spread and Dollar Roll

AGNC Investment reported first-quarter 2023 net spread and dollar roll income per common share (excluding estimated "catch-up" premium amortization costs) of 70 cents per share beating the Zacks Consensus Estimate of 61 cents. The bottom line declined from 72 cents in the prior-year quarter.

Adjusted net interest and dollar roll income (excluding catch-up premium amortization) was $493 million, rising from the quarter-ago number of $423 million.

The company reported a first-quarter comprehensive loss per common share of 7 cents compared with the prior-year quarter’s loss of $2.23.

Inside the Headlines

NII was negative $98 million against $448 million in the year-ago quarter. NII also missed the Zacks Consensus Estimate of $299.3 million.

AGNC Investment's average asset yield on its portfolio was 2.93 % in the first quarter, down from 3.55% in the prior-year quarter.

In the reported quarter, the combined weighted average cost of funds, inclusive of the interest rate swap, was 1.02 % compared with 0.09% in the prior-year quarter.

The average net interest spread (excluding catch-up premium amortization) was 2.88%, up from 2.19% reported in the prior-year quarter.

AGNC Investment’s tangible net book value "at risk" leverage ratio was 7.7 as of Mar 31, 2023, compared with 7.8 in the prior-year quarter.

In the first quarter, the company's investment portfolio bore a weighted average actual constant prepayment rate of 5.2%, down from 14.5% in the prior-year quarter.

As of Mar 31, 2023, tangible net book value per share (BVPS) was $9.41, down from $13.12 as of Mar 31, 2022.

The economic loss on tangible common equity for the company in the reported quarter was 0.7%. This included a dividend per share of 36 cents and a decrease of 43 cents in tangible net BVPS.

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As of Mar 31, 2023, the company’s investment portfolio aggregated $56.8 billion. This included $45.1 billion of Agency mortgage-backed securities, $10.4 million of net to-be-announced mortgage position, and $1.3 billion of credit risk transfer and non-Agency securities.

As of Mar 31, 2023, AGNC Investment’s cash and cash equivalents totaled $975 million, down from $1.01 billion as of Dec 31, 2022.

Dividend Update

In the first quarter, AGNC Investment announced a dividend of 12 cents per share each for January, February and March. Notably, the company declared $12.2 billion in common stock dividends or $46.12 per common share since its initial public offering in May 2008 through first-quarter 2023.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, AGNC Investment has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

Outlook

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

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