Annaly Gears Up to Report Q4 Earnings: What's in Store for the Stock?

Core Viewpoint - Annaly Capital Management Inc. (NLY) is expected to report fourth-quarter 2024 results on January 29, with anticipated year-over-year growth in net interest income (NII) but a likely decline in earnings [1]. Financial Performance - In the last reported quarter, NLY posted adjusted earnings available for distribution (EAD) per average share of 66 cents, missing the Zacks Consensus Estimate of 67 cents, despite improvements in the average yield on interest-earning assets [2]. - The consensus estimate for fourth-quarter earnings is 67 cents per share, indicating a 1.47% decrease from the year-ago reported number [3]. - The consensus estimate for revenues is pegged at $242 million, showing a significant year-over-year rise from negative $53.5 million [4]. Market Conditions - The mREIT sector is likely to have benefited from favorable conditions in the fourth quarter, driven by reduced volatility in fixed-income markets, which is expected to have tightened mortgage spreads and boosted NLY's book value per share (BVPS) [5]. - Mortgage rates were close to 6.8% in the fourth quarter, slightly higher than the 6.2% observed at the end of the third quarter, impacting housing affordability and overall mortgage demand [6]. Operational Insights - A significant portion of NLY's mortgage-backed securities (MBS) holdings is expected to have experienced elevated levels of constant prepayment rates, positively impacting net premium amortization and supporting growth in interest income and average asset yield [7]. - The consensus estimate for fourth-quarter NII is pegged at $241.9 million, compared to an NII of $13.4 million in the previously reported quarter [7]. - The Federal Reserve's 50 basis point interest rate reduction in the fourth quarter is expected to have positively impacted NLY by decreasing funding costs [8]. Servicing Income - Prepayment speeds increased in October but have since slowed due to rising mortgage rates, likely negatively impacting NLY's mortgage servicing rights (MSR) portfolio and reducing servicing fees [9]. - The Zacks Consensus Estimate for net servicing income in the fourth quarter of 2024 is $104 million, indicating a sequential decline of 5.1% [9]. Earnings Prediction - The model indicates that it cannot be conclusively predicted that NLY will beat the Zacks Consensus Estimate this time, as the company lacks a positive Earnings ESP and a favorable Zacks Rank [10]. - Annaly has an Earnings ESP of 0.00% and currently carries a Zacks Rank of 4 (Sell) [11].