Annaly Capital Q4 earnings expected to slip more amid high interest rates (NYSE:NLY)

Annaly Capital Management (NYSE:NLY) is scheduled to post its Q4 earnings after the close on Wednesday. Investors will see just how well, or poorly, the mortgage REIT does in a continued environment of high interest rates.

Mortgage REITs are expected to benefit as interest rates decline. While the Federal Reserve hasn’t yet cut its policy rate, mortgage rates have eased from their recent peak. At Dec. 28, the average 30-year fixed-rate mortgage was 6.61%, down from 7.76% at Nov. 2.

SA Investing Group Leader Trapping Value will be looking at Annaly’s earnings for distribution and net interest margin. And by those measures, the analyst thinks NLY has issues.

With interest rates still elevated in Q4 2023, the mortgage REIT is expected to post earnings per share for distribution of $0.65, down from $0.68 in Q3 and $0.88 in Q4 2022. And if NLY falls short of the consensus estimate, it will be the third straight quarter of an earnings miss.

Q4 net interest income, though, is expected to swing into the green at $142.8M, according to the Visible Alpha consensus, after two straight quarters of negative net interest income.

The average estimate for book value per share is $19.02, compared with $18.25 at Sept. 30, 2023.

Overall, Trapping Value sees “more volatility in the sector, another round of falling book values, and a highly probable distribution cut as earnings available for distribution fall below $0.60.”

Meanwhile, SA Investing Group Leader Rida Morwa is patient to wait until the environment improves for Annaly (NLY). For the past two years, the firm has been buying mortgage-backed securities, on net. “The overall size of its portfolio demonstrates that NLY sold when MBS prices were high and has been buying as prices are lower. This will be a huge benefit to NLY’s book value as prices go up,” he said.

The average SA Analyst rating and the average Wall Street rating sit at Hold.