ETFs To Watch Post Dull Mortgage REIT Earnings

The year has been marked with ups and downs for mortgage REITs that provide real estate financing through the purchase of mortgages and mortgage-backed securities (MBS). Volatile markets triggered by global growth worries and mixed numbers from the U.S. economy weighed on these REITs.
 
In fact, this turbulence along with seesawing oil prices led to the central bank lowering the projected number of hikes this year. The Fed now expects the federal funds rate to rise to 0.875% by the end of the year, instead of the previously expected 1.375%, implying only two rate hikes as compared to the four projected in December. In its April meeting, the Fed kept the rates unchanged.
 
A low interest rate environment is expected to benefit the performance of mortgage REITs. These REITs finance their investments with equity and debt capital and generate profits through the spread between interest income on mortgage assets and funding costs. Lower interest rates would certainly aid their borrowing cost, pushing earnings and dividends higher. Meanwhile, these companies are buying back shares and diversifying their businesses to beat market woes.
 
Below we have highlighted the earnings of some of the major players in the mortgage REIT sector.
 
Earnings in Detail
 
American Capital Agency Corp. (AGNC) saw first-quarter 2016 net spread and dollar roll income of 52 cents per share (excluding the estimated “catch-up” premium amortization benefit) that fell short of the Zacks Consensus Estimateof 57 cents.The reported figure also came in lower than 54 cents in the prior-year quarter. Moreover, the company’s net interest income (“NII”) of $196 million missed the Zacks Consensus Estimate of $273.1 million andwaslower than $288 million in the prior-year quarter.
 
As of March 31, 2016, the company’s net book value per share was $22.09, down from $22.59 as of December 31, 2015. Shares of the company have gained 2% (as of May6, 2016) since the first-quarter earnings release.
 
Another key player, Annaly Capital Management, Inc. (NLY) saw first-quarter 2016 normalized core earnings per share of 30 cents, down from 34 cents earned a year ago and below the Zacks Consensus Estimate of 32 cents. NNI totaled $240.7 million, down 38.2% year over year and laggedthe Zacks Consensus Estimate of $271.8 million.
 
Annaly’s book value per share came in at $11.61 as of March 31, 2016, compared with $12.88 as of March 31, 2015. At the end of quarter, the company’s capital ratio (representing the ratio of stockholders’ equity to total assets) was 13.2%, down 14.3% year over year. Shares of the company gained 3.8% post earnings, as of May6.
 
ETFs to Watch