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AGNC Investment Beats on Q4 Earnings

By Eric Volkman - Jan 25, 2021 at 10:12PM

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The company says its strategy of concentrating on agency securities should continue to pay off.

On Monday, AGNC Investment (AGNC 0.34%) unveiled its latest quarterly report, showing a better-than-expected result on the bottom line.

For the mortgage real estate investment trust's (mREIT) fourth quarter of 2020, its total revenue rose by 23% to $459 million. Non-GAAP (adjusted) net spread and dollar roll income -- essentially, its bottom line -- rose 27% to $409 million, or $0.75 per share.

House sold sign with young family standing in front.

Image source: Getty Images.

Both figures beat the average analyst estimates. On average, prognosticators following the stock were expecting revenue that was almost 20% lower than the actual figure, and a per-share bottom line of only $0.65.

As an mREIT, AGNC invests in the mortgage-backed securities (MBSs) that help provide the financing for properties rather than the properties themselves, as is the case with the far more numerous equity REITs. Further, AGNC chiefly invests in agency MBSs, meaning those backed by government-sponsored enterprises such as Freddie Mac and Fannie Mae.

AGNC attributed its gains to continued recovery from the economic devastation of the coronavirus pandemic to "the unique value of a predominately agency MBS portfolio." The company added that the Federal Reserve purchased $1.5 trillion in such securities last year, effectively supporting the business's foundation.

Management believes the Fed is not about to abandon this policy.

"While agency MBS have appreciated along with the vast majority of financial assets over the past several quarters, significant Fed purchases, the potential for slower prepayments, and attractive funding levels that will likely remain for an extended period of time should continue to support the risk/return equation for levered investors in agency MBS," AGNC CEO Gary Kain said.


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Stocks Mentioned

AGNC Investment Corp. Stock Quote
AGNC Investment Corp.
$11.76 (0.34%) $0.04
Federal National Mortgage Association Stock Quote
Federal National Mortgage Association
$0.67 (-1.18%) $0.01
Federal Home Loan Mortgage Corporation Stock Quote
Federal Home Loan Mortgage Corporation
$0.68 (-0.72%) $0.00

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