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REIT Q3 Earnings: ETFs in Focus

The earnings season is off to a flying start with equity markets scaling record highs, owing to a slew of upbeat economic data, strong corporate performance and President Donald Trump's tax reform proposal. However, the performance has been a mixed bag for REITs, with some beating market expectations, while a few failing to do so.


We will now discuss the performance of two REITs, Annaly Capital Management NLY and AGNC Investment Corporation AGNC.


Annaly Capital Management


REIT Annaly Capital Management reported third-quarter 2017 net interest income of $353.6 million, reflecting a decrease of 8% from $384.5 million a year ago. However, it increased 12.2% sequentially. It reported core earnings per share (excluding premium amortization adjustment of $0.04 per share) of $0.30, surpassing the Zacks Consensus Estimate of $0.29.


However, it reported Other Income of $28.2 million in the quarter compared with $29.2 million in the year-ago quarter. It had reported Other Income of $30.9 million in the previous quarter.


Comprehensive income came in at $577.9 million compared with $289.4 million in the previous quarter. The company had registered income of $733.5 million in the year-ago quarter. Moreover, the company announced a dividend of $0.30 per share for the quarter.


The company reported book value per share of $11.42, increasing 2.1% from $11.19 in the previous quarter. Its book value per share was $11.83 in the year-ago quarter.  


Shares of NLY increased around 0.7% in afterhours trading on Nov 1, 2017.


AGNC Investment Corporation


REIT AGNC Investment Corporation reported third-quarter 2017 net spread and dollar roll income (excluding $0.03 per share catch up premium) of $0.59/ share, missing the Zacks Consensus Estimate of $0.63. It reported net interest income of $178 million for the quarter in discussion, declining roughly 18.7% from $219 million a year ago. Moreover, net interest income declined roughly 1.7% from $181 million in the previous quarter.


Moreover, it reported high variability in Other Income (loss) data of $125 million in the quarter against an income of $307 million in the year-ago quarter. It reported a loss of $141 million in the previous quarter.


Comprehensive income came in at $631 million compared with $138 million in the previous quarter. The company had registered income of $421 million in the year-ago quarter. Moreover, the company declared a dividend of $0.54 per share for the quarter.


The company reported net book value per share of $21.19, increasing 1.9% from $20.80 in the previous quarter. Its tangible net book value per share also increased to $19.78 from $19.25 in the previous quarter.


Shares of AGNC declined 4.2% at market close on Oct 26, 2017.


Let us discuss the ETFs that have a relatively high exposure to the two companies (read: Dollar Rebounds: 5 ETFs to Cash in On).


iShares Mortgage Real Estate Capped ETF REM


This fund offers exposure to the U.S. residential and commercial real estate space. It has AUM of $1.3 billion and charges a fee of 48 basis points a year. It has 18.9% exposure to Annaly and 11.0% to AGNC (as of Oct 31, 2017). The fund has returned 8.5% year to date and 9.4% in a year (as of Nov 1, 2017). The fund has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.


VanEck Vectors Mortgage REIT Income ETF MORT


This fund seeks to provide exposure to the U.S. mortgage REIT space. It has AUM of $153 million and charges a fee of 41 basis points a year. It has a 11.8% exposure to Annaly and 6.8% to AGNC (as of Nov 1, 2017). The fund has returned 10.0% year to date and 10.7% in a year (as of Nov 1, 2017). The fund has a Zacks ETF Rank #3 with a Medium risk outlook.


Below is a year-to-date chart comparing the performance of the funds and the two companies.


 
Source: Google Finance


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REITS/MORTGAGE (REM): ETF Research Reports
 
VANECK-MTG REIT (MORT): ETF Research Reports
 
AGNC Investment Corp. (AGNC): Free Stock Analysis Report
 
Annaly Capital Management Inc (NLY): Free Stock Analysis Report
 
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