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Hatteras Financial PT Cut By MLV

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In a report published Thursday, MLV & Co analyst Richard Eckert maintained a Buy rating on Hatteras Financial (NYSE: HTS). The price target was reduced from $22.50 to $20.25.

In the report, MLV & Co noted, "In part, the lower PT reflects a small decline in book value (BV) in 4Q14, but mostly it gives recognition to the likelihood 2015 will bear witness to no small amount of volatility in the bond markets and that BVs throughout the agency mortgage REIT (mREIT) sector will be fluid. Thus, we have applied discounts of 5-10% to the projected BVs, upon which we base our valuations, of several of the mREITs we follow in the sector. Given that the average peer is currently trading at only 83% (median peer is trading at 84%), we do not believe this is an unrealistic assessment." Even the new price target represents a "potential upside of 12% at present market values," Eckert wrote.

Earlier this week, the company had reported 4Q14 Core EPS of $0.59, ahead of expectations. "Our only disappointment in HTS' 4Q14 financial results was the 26¢ decline in BV, mostly the result of a GAAP loss per share of 32¢. The GAAP loss, in turn, was mostly the product of an $80mm, or 83¢ per share, loss on the company's derivative instruments. The bulk of that loss was attributable to fair value adjustments totaling $107mm on the Eurodollar futures contracts hedging HTS' agency RMBS. Realized and unrealized gains on the latter only amounted to a little more than $40mm," Eckert explained.

Latest Ratings for HTS

Apr 2016Ladenburg ThalmannDowngradesBuyNeutral
Jan 2016Wells FargoDowngradesOutperformMarket Perform
Nov 2015NomuraDowngradesBuyNeutral

View More Analyst Ratings for HTS
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Posted-In: MLV & CoAnalyst Color Price Target Analyst Ratings


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