mREITs' Q2 Earnings to Watch on Aug 2: EARN, JCAP & More

The second-quarter earnings for the real estate investment trusts ("REITs") sector have almost completed two weeks. A number of companies from the various categories of REITs such as the retail, equity and apartment have come out with the June-quarter end releases.

Important mortgage REITs ("mREITs") – a variant category of the commonplace REITs – which reported their Apr–Jun 2016 quarter results on Jul 27 were American Capital Agency Corp. AGNC and Capstead Mortgage Corp. CMO. While American Capital Agency reported positive earnings surprise of 9.8%, Capstead Mortgage came out with a negative surprise of 17.4%.

Some mREITs which are slated to report June quarter-end results on Aug 2 are Ellington Residential Mortgage REIT EARN, Jernigan Capital, Inc. JCAP, MFA Financial, Inc. MFA, New Residential Investment Corp. NRZ and New York Mortgage Trust Inc. NYMT.

mREITs borrow money at a low rate of interest, and in turn use it to purchase mortgage backed securities. So, a low interest rate environment serves as a boon for the mREIT industry. During the first half of the second quarter, the chances of a rate hike kept the mREIT industry on tenterhooks. However, following the dismal jobs report in early June, chances of a hike were diminished substantially. This somewhat allayed the concerns of this industry.

Now let's take a look at what's in store for these mREITs which are slated to report on Aug 2.

For doing this, we rely on the Zacks methodology of combining a favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) – and a positive Earnings ESP, to predict the chances of a beat this quarter.

Our proprietary methodology, Earnings ESP, shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Research shows that with this combination of rank and ESP, chances of a positive earnings surprise are as high as 70% for the stocks.

Old Greenwich, CT-based Ellington Residential Mortgage is engaged in acquiring, investing in and managing residential mortgage and real estate-related assets. The company has an Earnings ESP of 0.00% and a Zacks Rank #3. Our model does not conclusively predict that the company will record a positive surprise.

Jernigan Capital, headquartered in Memphis, TN, is engaged in providing finances to private developers, owners and operators of self-storage facilities. The company has an Earnings ESP of 0.00% and a Zacks Rank #2. Our model does not conclusively predict that the company will record a positive surprise.

New York-based MFA Financial is mainly engaged in the business of investing in MBSs. The company has an Earnings ESP of 0.00% and a Zacks Rank #3. Our model does not conclusively predict that the company will record a positive surprise.

New Residential Investment is a New York-based mREIT which invests and manages residential real properties. The company has an Earnings ESP of -6.12% and a Zacks Rank #4 (Sell). The company lacks in both the requirements and our model does not predict an earnings beat.

New York Mortgage Trust is engaged in owning and managing a leveraged portfolio of residential mortgage securities and a mortgage origination business. The company has an Earnings ESP of 0.00% and a Zacks Rank #4. Our model does not conclusively predict that the company will record a positive surprise.

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