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.
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