Wells Fargo Cuts Estimates For American Capital Agency

Wells Fargo reduced its estimates on American Capital Agency Corp. AGNC Wednesday and maintained a Market Perform rating with a $22-$23 valuation range.

Analyst Joel Houck commented that the company reported a Q4 GAAP loss per share of $0.94 per share and $0.85 of net spread and dollar roll income per share, also known as Core EPS, versus the firm’s estimate of $0.79.

“Core EPS included $0.47 of dollar roll income associated with AGNC's $18.5B average net long position in the TBA market,” according to Houck.

With the uncertain interest rate environment, Houck believed the company’s “increased allocation to 15 year MBS, coupled with a roughly neutral duration gap, will allow the company to manage for pre-payment and extension risk scenarios.”

The firm reduced its 2015 earnings estimates from $2.82 to $2.65 and established a 2016 estimate of $2.59.

The valuation range was based on a 85 percent to 90 percent multiple of the firm’s Q4 book value of $25.74.

American Capital Agency closed at $21.43 Wednesday, down 1.38 percent.