What happened
Shares of the mortgage real estate investment trust (mREIT) Apollo Commercial Real Estate Finance (ARI -1.54%) popped today after the company reported its third-quarter earnings results. The stock traded roughly 19.6% higher as of 1:13 p.m. ET on Tuesday.
So what
Apollo reported adjusted earnings per diluted share of $0.37 on total revenue of $76.3 million, both numbers beating analyst estimates for the quarter.
"Our third-quarter results demonstrate the resilience of ARI's floating-rate loan portfolio in a quickly evolving and volatile market environment," CEO Stuart Rothstein said in the earnings statement.
Rothstein also said, "In addition to reporting distributable earnings in excess of our common stock dividend, ARI has made significant progress with key asset management initiatives for several of our loans, which enables ARI to reinvest capital that previously was not earning an optimal return."
Notably, book value per share, excluding the allowance for loan losses, jumped to $16.12 at the end of the third quarter, up more than 6% from the previous quarter, as the company successfully sold several loans in the quarter that turned into gains. Many mREITs are currently seeing their book values eroded as higher interest rates hit their bond portfolios.
Now what
Apollo beat earnings estimates and grew book value at a time when many mREITs are struggling to do so. Furthermore, 98% of the company's loans are floating rate, which means their yields adjust higher along with interest rates, which is more common for a commercial loan portfolio.
With the stock still only trading at about 70% of its book value, Apollo looks well positioned right now to continue taking advantage of the current environment.
