What happened
Shares of Annaly Capital Management (NLY -0.32%) surged higher on Thursday, jumping 6.2% shortly after the opening bell at 9:48 a.m. ET. By 1:15 p.m. ET, it remained up about 4.8% on the day. The stock is down about 40% year to date.
The markets were mixed on Thursday morning as the Dow Jones Industrial Average was up more than 400 points at around 1:15 p.m. ET. The S&P 500 was up slightly, but the Nasdaq was in negative territory in the early afternoon.
So what
Annaly Capital Management, a mortgage real estate investment trust (REIT), posted strong third-quarter earnings after the market close on Wednesday, which sent the stock price surging higher.
Annaly Capital beat revenue and earnings estimates for the quarter. The REIT posted $1.06 per share in earnings available for distribution (EAD), a common measure for REITs, excluding nonrecurring items. It bested estimates of $1.03 per share but was down from $1.12 a year ago. This is the fifth straight quarter it has topped year-over-year estimates.
Also, the company posted net interest income of $278 million, which was down from $362 million a year ago. It fell short of consensus estimates.
Given the difficult housing market, CEO David Finkelstein was pleased, as were investors.
In the earnings release, Finkelstein said: "Our strong capital base, disciplined portfolio and risk management, and deep financing sources have enabled us to weather this persistent volatility and prepare us for further sustained macroeconomic uncertainty. While we expect to maintain our defensive positioning due to the difficult operating environment, we continue to view asset valuations as attractive and are poised to take advantage of opportunities when technical factors improve."
Now what
Annaly posted total assets of $86 billion, up from $82 billion the previous quarter, with agency assets up 4.5% to $78 billion. Also, its mortgage servicing rights platform gained 9% to $1.9 billion.
Mark DeVries, an analyst at Barclays (BCS -1.03%), upgraded Annaly on Thursday to overweight, rising the price target to $19 per share, which is only up a few ticks from its current value.
While the market over the next few quarters should be difficult for Annaly, given rising interest rates and the state of the housing market, it remains an excellent income stock. It maintained an $0.88 per share quarterly dividend in the third quarter at a yield of 20.5%, up from a 14.9% yield last quarter and a 10.5% yield in the third quarter of 2021.
