Annaly Capital Management Inc. NLY is scheduled to report fourth-quarter 2024 results on Jan. 29, after market close. The company’s results are expected to reflect year-over-year growth in net interest income (NII), while earnings are likely to decline. 

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In the last reported quarter, the mortgage real estate investment trust (mREIT) posted adjusted earnings available for distribution (EAD) per average share of 66 cents, which missed the Zacks Consensus Estimate of 67 cents. Improvements in the average yield on interest-earning assets supported the results. However, NLY recorded a year-over-year decline in book value per share (BVPS).

Annaly has a decent earnings surprise history. Its earnings beat the Zacks Consensus Estimate in two of the trailing four quarters and matched on one occasion and missed once, the average surprise being 1.95%.

The Zacks Consensus Estimate for NLY’s fourth-quarter earnings of 67 cents per share has remained unchanged in the past seven days. The figure indicates a 1.47% decrease from the year-ago reported number.

The consensus estimate for revenues is pegged at $242 million, indicating a significant year-over-year rise from negative $53.5 million.

Key Factors & Estimates for NLY in Q4

The mREIT sector is likely to have benefited from favorable conditions during the fourth quarter, driven by reduced volatility in fixed-income markets. This decline in volatility is expected to have tightened the mortgage spreads, boosting the BVPS of NLY.

In the fourth quarter of 2024, mortgage rates were close to 6.8%, slightly higher than the 6.2% observed at the end of the third quarter. The elevated rates weighed on housing affordability, leading to a decline in overall mortgage demand. Despite this, refinancing activities and origination volumes were decent. 

Driven by decent refinancing activities, a significant portion of NLY’s MBS holdings is anticipated to have witnessed elevated levels of constant prepayment rate. This is expected to have positively impacted net premium amortization in the fourth quarter, thereby supporting growth in interest income and average asset yield.

The consensus estimate for fourth-quarter NII is pegged at $241.9 million, whereas it reported an NII of $13.4 million in the previously reported quarter.

The Federal Reserve's 50 basis point interest rate reduction in the fourth quarter of 2024, following the rate cuts in September, is expected to have positively impacted NLY. As a result, the company is likely to have experienced a decrease in funding costs. This is likely to have lowered costs of interest-bearing liabilities for NLY in the quarter to be reported.

Prepayment speeds increased in October due to strong volumes in September but have since slowed as mortgage rates have risen. Hence, the company’s MSR portfolio is likely to have been negatively impacted to some extent. This is likely to have reduced NLY's servicing fees in the quarter to be reported.

The Zacks Consensus Estimate for net servicing income in the fourth quarter of 2024 of $104 million indicates a sequential decline of 5.1%.

What the Zacks Model Reveals for Annaly

Per our model, it cannot conclusively be predicted that NLY will beat the Zacks Consensus Estimate this time around. This is because the company lacks the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Annaly has an Earnings ESP of 0.00%.

Zacks Rank: Annaly currently carries a Zacks Rank of 4 (Sell).

REITs Stocks That Warrant a Look

Two stocks from the broader REIT sector, which you may want to consider, as our model shows that these have the right combination of elements to report a surprise this time around, are OUTFRONT Media Inc. OUT and MFA Financial, Inc. MFA. 

OUTFRONT Media is expected to report fourth-quarter 2024 results on Feb. 19. OUT has an Earnings ESP of +1.91% and carries a Zacks Rank of 2 at present. You can see the complete list of today’s Zacks #1 Rank  stocks here.

MFA Financial is expected to report fourth-quarter 2024 results on Feb. 19. MFA has an Earnings ESP of +2.56% and a Zacks Rank of 2 at present.

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