American Capital Reports Strong - Analyst Blog
October 27 2011 - 10:00AM
Zacks
American Capital Agency
Corp. (AGNC), a real estate investment trust (REIT) that
focuses on investments in mortgage pass-through securities and
collateralized mortgage obligations (CMOs), reported earnings of
$1.39 per share during third quarter 2011, compared to $1.69 in the
year-earlier quarter. Excluding one-time items, recurring net
income for the reported quarter was $1.23 per share.
The company generated total
revenues of $326.8 million during third quarter 2011 compared to
$62.6 million in the year-ago quarter. Net interest income was
$231.7 million for the reported quarter, which was below the Zacks
Consensus Estimate of $259 million.
American Capital Agency recorded an
annualized return on equity of 20% for the quarter. As of September
30, 2011, the company’s investment portfolio comprised $42.0
billion worth of agency securities at fair value, including $38.3
billion of fixed-rate securities, $3.2 billion of adjustable-rate
securities and $0.5 billion of CMOs.
About 52% of the investment
portfolio comprises less than or equal to 15-year fixed-rate
securities, 37% of 30-year fixed-rate securities, 2% of 20-year
fixed-rate securities, 8% adjustable-rate securities, and 1% of
CMOs backed by fixed and adjustable-rate securities.
The investment portfolio of
American Capital Agency was financed with $38.8 billion of
repurchase agreements, $4.9 billion of equity capital and $0.1
billion of variable debt resulting in a leverage ratio of 7.9x.
Adjusting for the net payable for agency securities not yet
settled, the leverage ratio was 7.7x as of September 30, 2011.
American Capital Agency declared a
second quarter dividend of $1.40 per share, which equates to a
total of $936.7 million in dividends or $17.46 per share since its
initial public offering. American Capital Agency is one of only a
few companies to have increased its dividend even during the
recession.
American Capital Agency’s
annualized weighted average yield on average earning assets was
3.14% and its annualized average cost of funds was 1.00%, which
resulted in an annualized net interest rate spread of 2.14% during
the quarter – a 32-bps dip from the second quarter of 2011. As of
September 30, 2011, the company's book value per share was $26.90
compared to $26.76 as of June 30, 2011. At quarter-end, American
Capital Agency had cash and cash equivalents of $984.4 million.
American Capital Agency had earlier
initiated a ‘Controlled Equity Offering Program’ under which it
could offer from time to time up to an aggregate 15 million shares
in privately negotiated and/or at-the-market transactions.
During the reported quarter, the company sold 5.1 million shares at
an average price of $29.08 each for net proceeds of $147 million.
At quarter-end, 1.2 million shares remained available for issuance
under the program.
We maintain our ‘Neutral’
recommendation on American Capital Agency, which currently has a
Zacks #3 Rank translating into a short-term ‘Hold’ rating. However,
we have an ‘Underperform’ recommendation and a Zacks #5 Rank
(short-term ‘Strong Sell’) for Anworth Mortgage Asset
Corporation (ANH), a competitor of American Capital
Agency.
AMER CAP AGENCY (AGNC): Free Stock Analysis Report
ANWORTH MTGE (ANH): Free Stock Analysis Report
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