Reiterating Market Perform ratings, FBR and JMP Securities say Annaly (NLY +2%) can thank significantly lower prepayment speeds (CPR dropped to 7% from 13%). Premium amortization dropped to just $30.7M from $201.9M in Q3, says JMP's Steve Delaney, but he estimates as much as $50M of that (about a nickel per share) was a one-time "catchup" adjustment which would lower core EPS to just $0.28 - still above Street estimates.
FBR also notes the one-off nature of the benefit, but says other mREITs reported similar numbers and were rewarded, so why not Annaly.
Overall impressed with the Q, Nomura notes the book value decline of 4.5% was smaller than American Capital at 5.3% and CYS Investments at 8.5% (this was influenced by Annaly's conservative stance, meaning it may be lagging in the big book value bounce-back thus far this year).
Credit Suisse boosts its 2014 core EPS estimate to $1.25 from $1.07 and 2015 to $1.25 from $1.12. ”Given our new earnings estimates we expect that Annaly’s dividend should be stable in the coming quarters."
Previous coverage of Annaly results