Core Insights - The article discusses the investment positions of analysts in specific companies, highlighting their long positions in NLY and AGNC [1]. Group 1 - Analysts have disclosed beneficial long positions in the shares of NLY and AGNC, indicating a positive outlook on these companies [1]. - The article emphasizes that the opinions expressed are personal and not influenced by any external compensation [1].

Core Insights - The article discusses the investment positions held by analysts in AGNC and NLY, indicating a beneficial long position in these shares [1]. Group 1 - Analysts express personal opinions on the investment landscape without receiving compensation from the companies mentioned [1]. - The article emphasizes that past performance does not guarantee future results, highlighting the inherent uncertainties in investment [2]. - It clarifies that Seeking Alpha does not provide personalized investment advice and that the views expressed may not represent the platform as a whole [2].

Core Viewpoint - Annaly Capital Management (NLY) is a prominent player in the mortgage REIT sector, but investing in its common stock presents significant issues [1] Investment Options - Investors interested in mortgage REITs should consider preferred shares, which are suitable for both risk-averse investors and those seeking higher returns for taking on more risk [2] - Annaly Capital offers several preferred shares, with NLY-F currently near a buy rating, priced at $25.49 [2] Preferred Shares Analysis - NLY-F is approximately $0.16 above the buy rating, with a target price that accounts for call risk [3] - If Annaly calls shares of NLY-F immediately after purchase, investors could lose about $0.15 per share, although the likelihood of this happening is not 100% [3] - The dividend for NLY-F may decrease next quarter due to forecasts for the Fed Funds Rate, which influences short-term rates and dividend rates [3] Rate Expectations - If the Federal Reserve is expected to cut rates multiple times, investors may find preferred shares less attractive [4] - Conversely, if only 1 to 2 rate cuts are anticipated, preferred shares may appear more appealing [4] Financial Ratios - Annaly has a strong common equity to preferred equity liquidation ratio of 6.81, which increases to 7.31 when considering market cap [5] - This ratio indicates a solid cushion for preferred shareholders in the event of liquidation [5] Investment Strategy - Mortgage REITs, including Annaly, are not ideal for risk-averse investors due to their inherent risks and should be treated as trading securities [7] - Annaly's common shares have seen substantial price increases, leading to a perception of being overpriced [7] Market Positioning - The market cap to preferred share value ratio helps assess whether a mortgage REIT is trading above or below book value, influencing investor sentiment [8] - Annaly's preferred shares, particularly NLY-F and NLY-I, are more likely to be called due to their higher dividends compared to other preferred shares [9] Alternative Options - NLY-J is another viable option for investors, offering comparable yields but trading at a premium to its base value [10] Conclusion - Annaly's common shares have limited upside potential after a strong performance, making them less suitable for long-term holding [11] - Preferred shares are recommended for long-term positions due to their solid income and lower volatility compared to common stock [11] - NLY-F is close to a buy rating, and investors should wait for a dip into the buy range before considering purchases [12]

Core Insights - Annaly Capital Management, Inc. (NLY) reported third-quarter 2025 adjusted earnings available for distribution (EAD) per average share of 73 cents, surpassing the Zacks Consensus Estimate of 72 cents, and an increase from 66 cents in the same quarter last year [1][9] - The average yield on interest-earning assets improved to 5.40%, contributing to a net interest margin of 1.70%, while the book value per share (BVPS) declined to $19.25 from $19.54 year-over-year [3][4][9] Financial Performance - Net interest income (NII) for the quarter was $275.8 million, which fell short of the Zacks Consensus Estimate by 38.3%, compared to $13.4 million in the prior-year quarter [2] - Total assets increased to $125.9 billion, reflecting a 12.2% rise from the previous quarter [2] - The net interest spread (excluding premium amortization adjustment) improved to 1.50%, up from 1.32% in the prior-year quarter [3] Key Ratios and Metrics - The economic capital ratio stood at 14.8%, an increase from 14.6% in the prior-year quarter [4] - The weighted average actual constant prepayment rate rose to 8.6%, compared to 7.6% in the year-ago quarter [4] - Economic leverage remained stable at 5.7X as of September 30, 2025 [4] Return Metrics - Annaly generated an annualized EAD return on average equity of 14.7%, up from 12.9% in the prior-year quarter [5] Market Outlook - The company's performance in the third quarter was bolstered by an increase in average yield and total assets, although the decline in BVPS raises concerns [6] - The financial market's uncertainty may pose challenges in achieving solid returns moving forward [6]

Financial Data and Key Metrics Changes - The company's book value per share increased by 4.3% from $18.45 in the prior quarter to $19.25 [20] - Economic return for Q3 was 8.1%, bringing the year-to-date economic return to 11.5% [20][21] - Earnings available for distribution per share remained consistent at $0.73, exceeding the dividend for the quarter [22] - Average yields improved to 5.46% from 5.41% in the prior quarter, with net interest spread ex-PAA increasing to 1.5% [22][23] Business Line Data and Key Metrics Changes - The agency portfolio's market value increased to over $87 billion, up 10% quarter-over-quarter, with total growth of $7.8 billion [9] - Residential credit portfolio increased to $6.9 billion in economic market value, with average yields rising to 6.29% [11][22] - The mortgage servicing rights (MSR) portfolio increased by $215 million to $3.5 billion [15] Market Data and Key Metrics Changes - The U.S. economy showed resilience with GDP growth supported by consumer spending and AI-driven business investment [5] - Inflation remained elevated near 3%, with a modest impact from higher tariffs on goods inflation [6] - Labor market conditions weakened, with hiring slowing to 30,000 jobs per month [7] Company Strategy and Development Direction - The company maintains a diversified housing finance strategy, generating a 13% annualized economic return over the past three years [18] - Focus on maintaining high credit quality in residential credit and leveraging proprietary assets through the correspondent channel [15] - The company is positioned to benefit from expected Fed cuts and healthy fixed income demand [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the agency sector despite tighter spreads, citing improved fundamentals and technicals [26] - The outlook for the residential credit business is positive, with expectations for continued growth in the private label market [18] - Management remains cautious about taking on additional rate risk given current market uncertainties [56] Other Important Information - The company raised $1.1 billion of equity in Q3, including $800 million through its ATM program [8] - The MSR valuation multiple decreased slightly due to lower mortgage rates, but cash flows remain stable [16] - The company has $7.4 billion in unencumbered assets, including $5.9 billion in cash and Agency MBS [24] Q&A Session Summary Question: Agency returns and investment preferences - Management indicated that agency investments remain attractive despite tighter spreads, with expectations for increased demand from banks and REITs [26][27] Question: MSR bulk supply and pricing - Management noted that bulk supply has increased from large participants, with stable pricing throughout the year [29] Question: Breakdown of agency returns - Management provided insights on the spread to swaps versus treasuries, indicating a blended yield of about 160 basis points [33] Question: Book value performance - Management reported a 1% increase in book value pre-dividend accrual, translating to a 1.5% to 2% economic return [35] Question: Prepayment protection in the OBX portfolio - Management highlighted that the OBX portfolio has shown slower prepayment speeds than anticipated, benefiting from prepayment penalties [82]

Financial Data and Key Metrics Changes - The company's book value per share increased by 4.3% from $18.45 in the prior quarter to $19.25, achieving an economic return of 8.1% for Q3 and 11.5% year-to-date [20][21] - Earnings available for distribution per share remained consistent at $0.73, exceeding the dividend for the quarter [22] - The average yield improved to 5.46% from 5.41% in the prior quarter, while the average repo rate improved by three basis points to 4.5% [22][23] Business Line Data and Key Metrics Changes - The agency portfolio's market value increased to over $87 billion, up 10% quarter-over-quarter, with total growth of $7.8 billion [9][10] - The residential credit portfolio increased to $6.9 billion in economic market value, with significant contributions from securitization and loan purchases [11][12] - The mortgage servicing rights (MSR) portfolio increased by $215 million to $3.5 billion, with stable cash flows and low delinquency rates [15][16] Market Data and Key Metrics Changes - The U.S. economy showed resilience with GDP growth supported by consumer spending and AI-driven business investment, despite elevated inflation near 3% [5][6] - Labor market conditions weakened, with hiring slowing to 30,000 jobs per month, leading to a slight increase in the unemployment rate [7] - Interest rate volatility declined, benefiting the company's portfolio by lowering convexity costs [8] Company Strategy and Development Direction - The company maintains a diversified housing finance strategy, generating a 13% annualized economic return over the past three years [19] - The investment strategies are positioned for the balance of the year, with expectations of declining macro volatility and additional Fed cuts [18] - The company aims to increase its residential credit and MSR weightings to a combined 40% [27][28] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive outlook for the agency sector, citing improved demand dynamics and expectations for regulatory reform [17][18] - The company remains cautious about taking on additional rate risk, preferring to maintain a stable duration profile amid market uncertainties [56][59] - The management highlighted the importance of maintaining high credit quality in the residential credit portfolio, especially in light of softer housing market conditions [15] Other Important Information - The company raised $1.1 billion of equity in Q3, including $800 million through its ATM program [8] - The MSR valuation multiple decreased modestly due to lower mortgage rates, but the portfolio remains well insulated [16] Q&A Session Summary Question: Agency returns and investment preferences - Management noted that despite tighter spreads, the agency sector remains attractive due to improved fundamentals and technicals [26] Question: Bulk supply and pricing for MSR - The bulk supply has increased from large participants, with stable pricing encouraging future bulk supply [29] Question: Breakdown of agency returns - The spread to swaps versus treasuries is around 35 to 40 basis points, with low realized volatility aiding hedging costs [33] Question: Outlook for mortgage spreads and securitization - Non-QM issuance is expected to grow, with the market penetration of non-QM loans increasing significantly [47][49] Question: Duration risk and portfolio management - The company is currently maintaining a close-to-zero duration gap due to market uncertainties, with a cautious approach to taking on additional rate risk [56][59]

Financial Data and Key Metrics Changes - The company's book value per share increased by 4.3% from $18.45 in the prior quarter to $19.25, achieving an economic return of 8.1% for Q3 and 11.5% year to date [19][20] - Earnings available for distribution per share remained consistent at $0.73, exceeding the dividend for the quarter [20] - The average yield improved to 5.46% compared to 5.41% in the prior quarter, while the average repo rate improved by three basis points to 4.5% [20][21] Business Line Data and Key Metrics Changes - The agency portfolio's market value increased to over $87 billion, up 10% quarter over quarter, with total growth of $7.8 billion [10] - The residential credit portfolio increased to $6.9 billion in economic market value, with new origination non-QM AAA spreads tightening by 15 basis points [12] - The mortgage servicing rights (MSR) portfolio increased by $215 million to $3.5 billion, with stable cash flows and unchanged serious delinquencies at 50 basis points [15] Market Data and Key Metrics Changes - The U.S. economy showed resilience with GDP growth likely on pace with Q2, supported by consumer spending and AI-driven business investment [6] - Labor market conditions weakened, with hiring slowing to 30,000 jobs per month, while inflation remained elevated near 3% [6][7] - The agency MBS market saw improved supply and demand dynamics, with fixed income fund inflows more than 50% higher than the average over the past few quarters [10] Company Strategy and Development Direction - The company maintains a diversified housing finance strategy, which has generated a 13% annualized economic return over the past three years [17] - The focus remains on maintaining a high credit quality portfolio and leveraging proprietary assets through the correspondent channel [14] - The company is positioned to benefit from expected Fed cuts and a healthy fixed income demand, with plans to increase allocations to residential credit and MSR [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive outlook, highlighting the benefits of declining macro volatility and anticipated Fed cuts [16] - The company remains flexible in the current investing climate with historically low leverage and significant liquidity [18] - Concerns about the housing market were noted, with expectations of modest cumulative depreciation due to elevated mortgage rates [14] Other Important Information - The company raised $1.1 billion of accretive equity in Q3, including $800 million through its ATM program [9] - The MSR valuation multiple decreased modestly due to lower mortgage rates, but the portfolio remains well insulated [15] Q&A Session Summary Question: Agency returns and investment preferences - Management indicated that agency investments remain attractive despite tighter spreads, with expectations for increased demand from banks and overseas participants [26][27] Question: MSR bulk supply and pricing - The bulk supply has increased from large participants, with stable pricing throughout the year, encouraging future bulk supply [29][30] Question: Agency returns breakdown - The spread to swaps versus treasuries is around 35 to 40 basis points, with low realized volatility aiding hedging costs [35][36] Question: MSR purchase strategy - The company prefers lower note rate MSRs to mitigate negative convexity risk, with a focus on maintaining a diversified portfolio [46][48] Question: Outlook for mortgage spreads and securitization - Management expects stable mortgage spreads to support continued market activity, with NonQM market penetration increasing [51][54] Question: Duration risk and portfolio management - The company is currently maintaining a close to zero duration gap due to market uncertainty, with plans to manage risks carefully [62][66] Question: GSEs' potential impact on the market - Speculation exists regarding GSEs becoming more active buyers, but the market has strong demand from REITs and fixed income funds [70][71]

Financial Data and Key Metrics Changes - The book value per share increased by 4.3% from $18.45 in the prior quarter to $19.25, achieving an economic return of 8.1% for Q3 2025 and 11.5% year-to-date [19][20] - Earnings available for distribution per share remained consistent at $0.73, exceeding the dividend for the quarter [20] - The average yield improved to 5.46% from 5.41% in the prior quarter, while the average repo rate improved by three basis points to 4.5% [20] Business Line Data and Key Metrics Changes - The agency portfolio's market value increased to over $87 billion, up 10% quarter-over-quarter, with a total growth of $7.8 billion [8][19] - The residential credit portfolio increased to $6.9 billion in economic market value, with significant contributions from new securitizations [10][11] - The mortgage servicing rights (MSR) portfolio increased by $215 million to $3.5 billion, with stable cash flows and low delinquency rates [13][14] Market Data and Key Metrics Changes - The U.S. economy showed resilience with GDP growth supported by consumer spending and AI-driven business investment, despite elevated inflation near 3% [4][5] - Labor market conditions weakened, with hiring slowing to 30,000 jobs per month, leading to a slight increase in the unemployment rate [5] - The agency MBS market saw improved supply and demand dynamics, with fixed income fund inflows over 50% higher than average [9] Company Strategy and Development Direction - The company maintains a diversified housing finance strategy, focusing on agency MBS, residential credit, and MSR, which has generated a 13% annualized economic return over the past three years [16][18] - The outlook remains positive, with expectations of additional Fed cuts and healthy fixed income demand supporting investment strategies [17][18] - The company aims to increase its residential credit and MSR weightings to a combined 40% in the near term [26] Management's Comments on Operating Environment and Future Outlook - Management noted that the macro environment is expected to remain stable, with declining volatility and a favorable technical backdrop for agency MBS [16][17] - The company is cautious about taking on additional rate risk, preferring to maintain a close-to-zero duration gap due to market uncertainties [50][52] - The management expressed confidence in the stability of earnings available for distribution, supported by a strong swap portfolio and low leverage [60][67] Other Important Information - The company raised $1.1 billion of equity in Q3, including $800 million through its ATM program, and reopened the mortgage REIT preferred market [6][7] - The MSR valuation multiple decreased slightly due to lower mortgage rates, but the portfolio remains well insulated with stable cash flows [14][15] - A new partnership with PennyMac Financial Services was announced, enhancing the company's servicing capabilities [16] Q&A Session Summary Question: Agency returns and investment preferences - Management indicated that agency investments remain attractive despite tighter spreads, with expectations for increased demand from banks and REITs as the Fed continues to cut rates [25][26] Question: Bulk supply and pricing of MSR - The bulk supply of MSR has increased by 50%, primarily from large participants, with stable pricing throughout the year [27] Question: Breakdown of agency returns - The spread to swaps versus treasuries is around 35 to 40 basis points, with a blended yield of about 160 basis points, indicating a favorable risk-return profile [30] Question: Prepayment protection in specified pools - Management discussed the advantages of specified pools for prepayment protection, emphasizing their long-term options and favorable convexity profiles [34][35] Question: Outlook for mortgage spreads and securitization - The company expects continued activity in the non-QM market, with stable mortgage spreads allowing for growth despite seasonal pressures [42][43] Question: Duration risk and leverage - Management confirmed a cautious approach to duration risk, maintaining a close-to-zero duration gap while evaluating opportunities for future leverage [50][52] Question: Stability of NII and dividend coverage - The company expressed confidence in maintaining stable NII levels and ensuring dividend coverage, supported by a strong hedge ratio [58][67]

Financial Performance - Earnings available for distribution was $0.73 per average common share for the quarter[11] - Book value per common share was $19.25[11] - The company declared a quarterly common stock cash dividend of $0.70 per share[11] - Economic return was 8.1% for the quarter and 11.5% year-to-date through the third quarter[11] Portfolio Composition and Growth - Total portfolio was $97.8 billion, including $87.3 billion in Agency MBS, representing 89% of total assets and 64% of dedicated capital[11] - The Agency portfolio grew by 10% during the quarter, with new purchases predominantly in specified pools with call protection across 5.5% and 6.0% coupons[11] - The Residential Credit portfolio increased 4% to $6.9 billion, representing 17% of dedicated capital[11] - The MSR portfolio increased 6% to $3.5 billion in market value, representing 19% of dedicated capital[11] Financing and Capital Markets Activities - Economic leverage was 5.7x, down from 5.8x in the second quarter[11] - The company raised $1.1 billion of accretive capital during the quarter, including $823 million of common equity and $275 million through preferred stock issuance[11] - The company priced 24 residential whole loan securitizations totaling $12.4 billion in proceeds year-to-date[11]

Core Insights - Annaly Capital Management (NLY) reported quarterly earnings of $0.73 per share, exceeding the Zacks Consensus Estimate of $0.72 per share, and up from $0.66 per share a year ago, representing an earnings surprise of +1.39% [1][2] Earnings Performance - Over the last four quarters, the company has consistently surpassed consensus EPS estimates, achieving this four times [2] - For the quarter ended September 2025, Annaly posted revenues of $275.75 million, which fell short of the Zacks Consensus Estimate by 38.31%, compared to revenues of $13.4 million in the same quarter last year [2] Stock Movement and Market Comparison - Annaly shares have increased approximately 15% since the beginning of the year, outperforming the S&P 500's gain of 14.5% [3] Future Earnings Outlook - The company's earnings outlook is crucial for investors, including current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the next quarter is $0.74 on revenues of $455 million, and for the current fiscal year, it is $2.89 on revenues of $1.4 billion [7] Industry Context - The REIT and Equity Trust industry, to which Annaly belongs, is currently ranked in the bottom 42% of over 250 Zacks industries, indicating potential challenges for stock performance [8]