Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Two Harbors Fell Today

By Bram Berkowitz - May 6, 2021 at 5:01PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The real estate investment trust reported earnings for the first quarter of 2021. The company missed expectations on core earnings and book value fell.

What happened

Shares of Two Harbors Investment (TWO -0.88%) fell 12.6% today after the company reported earnings results for the first quarter of the year.

So what

Two Harbors, a mortgage servicing real estate investment trust (REIT), reported a nearly $223 million profit in the first quarter, or $0.81 earnings per share (EPS), up from $192.2 million in the first quarter of 2020.

Core earnings of $0.17 EPS, however, which excludes realized and unrealized gains and losses, declined from the first quarter of 2020 and missed analysts' expectations. The book value, or equity, of the company ended the quarter at $7.29 per share, down 2.2% from the previous quarter.

Person with marker drawing downward squiggly line.

Image source: Getty Images.

"With mortgage spreads at historically tight levels, our Agency + MSR [mortgage servicing rights] strategy, with its lower exposure to mortgage spreads, is especially attractive," Bill Greenberg, Two Harbors president and CEO, said in a statement. "As spreads normalize, we expect to increase leverage and deploy excess capital at more attractive levels. In the meantime, we are committed to growing our MSR portfolio and have expanded our funding capacity to execute on that strategy."

Now what

Two Harbors' stock was volatile during the pandemic and still has not recovered from pre-pandemic levels. While some fear the mortgage market may have peaked, Two Harbors has a portfolio of agency residential mortgage-backed securities and a mortgage servicing portfolio that should help it offset the impact of rising interest rates if they come.

The REIT, like others, also pays an attractive dividend yield. Trading below book value, there is upside for Two Harbors, but the ride may be a little bumpy.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Two Harbors Investment Corp. Stock Quote
Two Harbors Investment Corp.
$5.05 (-0.88%) $0.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/09/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.