JMP Securities - Weighs In On 3 High-Yield Mortgage REITs After Q4 Earnings

On February 25, JMP Securities issued a note updating ratings and price targets on the mortgage REIT (mREIT) sector, including:  Annaly Capital Management

 New York Mortgage Trust

 ARMOUR Residential REIT

Tale Of The Tape - Past Year

Annaly Capital Management - Market Perform JMP reiterated its Market Perform rating on the shares of Annaly Capital Management.  "Annaly Capital reported 4Q core EPS of $0.30, which met [JMP's] estimate, and was a penny below the consensus. Importantly, 4Q core earnings provided full coverage for the current quarterly dividend rate payout of $0.30."  NLY tangible book value per share was $12.97; "up 1.8% from $12.74 at September 30, topping [JMP's] year-end estimate of $12.77."  JMP calculated "NLY provided its shareholders with a total economic return (TER) of 18.1% in 2014, (well above the average 2014 TER of 14.7% for the nine agency MREITs…)"  NLY 2014 TER "is a significant improvement over NLY's 2013 TER of -14.3%, reflecting generally more stable pre-payments and interest rates for most of 2014 compared to 2013." JMP noted, "that 2015 will prove to be a more challenging year for NLY and its agency MREIT peers with a flattening yield curve and generally faster pre-payment speeds pressuring earnings and dividends, which is the basis for our Market Perform rating." New York Mortgage Trust - Market Perform JMP reiterated its Market Perform rating on the shares of New York Mortgage Trust.  NYMT "reported 4Q GAAP earnings of $0.42, which significantly beat the consensus of $0.23 provided by SNL Financial."  "Similar to the 3Q earnings report, the material outperformance in 4Q was driven by three items, which were either non-recurring or non-cash and, therefore, difficult for analysts to predict and model."  JMP elaborated, that "the company sold certain Freddie Mac multi-family securities for a realized gain on sale of $22.7M or ~$0.24 per share. The company also reported an unrealized gain on its multi-family loans held in securitizations of $13.9M or $0.14 per share. Last, realized gains on the sale or refinancing of distressed residential loans contributed $4.9M or $0.05 of total earnings." JMP reiterated its Market Perform rating on NYMT "primarily due to the company's premium P/BV valuation of 1.09x compared to a peer group average of 0.91x for the credit/hybrid MREITs." ARMOUR Residential REIT - Market Perform JMP reiterated its Market Perform rating on ARMOUR Residential REIT.  ARMOUR "reported core EPS of $0.10, $0.01 ahead of [JMP's] $0.09 estimate, but $0.02 below consensus of $0.12."  JMP noted, that "Core EPS was also down $0.03 from $0.13 in the third quarter, and came in $0.02 below the 1Q15 monthly dividend rate of $0.04."  JMP calculated a "total economic return (TER) of 4.8% for ARR for full-year 2014, compared to an agency peer group average of 14.7%." JMP calculates its TER metric based upon a formula easy for investors to understand: (change in book value plus dividends paid).