Earnings Preview: American Capital - Analyst Blog
July 25 2011 - 6:45AM
Zacks
American Capital Agency
Corp. (AGNC), a real estate investment
trust, is slated to release its second quarter 2011 results on July
26, 2011, after the closing bell. The current Zacks Consensus
Estimate for the second quarter is pegged at $1.34 per share,
representing a year-over-year growth of about 26.4%.
First Quarter
Recap
American Capital Agency reported
earnings of $1.48 per share during first quarter 2011, compared
with $2.13 in the year-earlier quarter. Excluding one-time items,
recurring net income in the reported quarter was $1.30 per share.
The recurring earnings for first quarter 2011 missed the Zacks
Consensus Estimate by 6 cents.
The company generated total revenue
of $144.5 million during first quarter 2011 compared with $56.6
million in the year-ago quarter. Total revenue in the reported
quarter comfortably beat the Zacks Consensus Estimate of $106
million.
As of March 31, 2011, the company's
book value per share was $25.96 compared with $24.24 at the end of
fiscal 2010. At quarter end, American Capital Agency had cash and
cash equivalents of $300.6 million.
Agreement of
Analysts
In the last 7 days, 1 out of the 11
analysts covering the stock revised the EPS estimate downward for
the second quarter of 2011 while none moved in the opposite
direction. Similarly, over the last 30 days, 2 out of the 11
analysts decreased their estimates for the second quarter of 2011
while none increased the same.
Magnitude of Estimate
Revisions
Taking into account the analysts’
earnings revision, the Zacks Consensus Estimate for the second
quarter of fiscal 2011 remained constant over the last 7 days
but increased by 7 cents to $5.61 for fiscal 2011. However,
in the last 30 days, the Zacks Consensus Estimate decreased by a
penny to $1.34 per share for second quarter while it increased
by three cents to $5.61 per share for fiscal 2011.
Our
Recommendation
American Capital invests only in
fixed-rate agency securities where payments are guaranteed by the
U.S. government or government-owned entities, such as
Fannie Mae (FNMA), Freddie Mac (FMCC) and Ginnie
Mae. Specifically, American Capital invests in FMCC Gold
certificates, FNMA certificates, and GNMA certificates. American
Capital Agency's securities now have an explicit government
guarantee, which makes agency REITs a lucrative prospect for
investors.
However, the residential mortgage
market in the U.S. has experienced defaults, credit losses and
liquidity concerns in the recent past, which have reduced financial
industry capital, leading to reduced liquidity for some
institutions. These factors have impacted investor perception of
the risk associated with real estate related assets, including
agency securities and other high-quality RMBS (residential mortgage
backed securities) assets.
As a result, values for RMBS assets,
including some agency securities and other AAA-rated RMBS assets,
have experienced certain amount of volatility. Increased volatility
and deterioration in the broader residential mortgage and RMBS
markets may adversely affect the performance of American Capital
going forward.
We currently have a Zacks #3 rank on
American Capital, which translates into a short tem Hold rating. We
are also maintaining our long-term Neutral recommendation on the
stock.
AMER CAP AGENCY (AGNC): Free Stock Analysis Report
FREDDIE MAC (FMCC): Free Stock Analysis Report
FANNIE MAE (FNMA): Free Stock Analysis Report
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