Why Annaly Capital Stock was up on Thursday

What happened

Shares of Annaly Capital Management (NLY 1.88%) surged Thursday, jumping 6.2% shortly after the opening bell at 9:48 a.m. ET. As of 1:15 p.m. ET, it remained up about 4.8% on the day. The stock is down about 40% since the start of the year.

Markets were mixed on Thursday morning as Dow Jones Industrial Average was up more than 400 points around 1:15 p.m. ET. The S&P500 increased slightly, but the Nasdaq was in negative territory at the start of the afternoon.

So what

Annaly Capital Management, a mortgage real estate investment trust (REIT), posted strong third-quarter earnings after the market closed on Wednesday, pushing the stock price higher.

Annaly Capital beat revenue and profit estimates for the quarter. The REIT posted $1.06 per share in earnings available for distribution (EAD), a common metric for REITs, excluding one-time items. It topped estimates of $1.03 per share, but was down from $1.12 a year ago. This is the fifth consecutive quarter that it has exceeded year-over-year estimates.

Additionally, the company reported net interest income of $278 million, down from $362 million a year ago. It is below consensus estimates.

Given the tough real estate market, CEO David Finkelstein was pleased, as were investors.

In the earnings release, Finkelstein said: “Our strong capital base, disciplined portfolio and risk management, and deep funding sources have enabled us to weather this continued volatility and prepare for macroeconomic uncertainty. While we expect to maintain our defensive positioning due to the challenging operating environment, we continue to view asset valuations as attractive and are poised to take advantage of opportunities as technicals improve.”

Now what

Annaly posted total assets of $86 billion, up from $82 billion in the prior quarter, with agency assets up 4.5% to $78 billion. Additionally, its mortgage servicing rights platform gained 9% to $1.9 billion.

Mark DeVries, analyst at Barclays (BCS -1.00%)upgraded Annaly to overweight on Thursday, bringing the price target to $19 per share, which is only a few ticks from its current value.

While the market over the next few quarters is expected to be tough for Annaly, given rising interest rates and the state of the housing market, there remains excellent stock of income. It maintained a quarterly dividend of $0.88 per share in the third quarter at a 20.5% yield, compared to a 14.9% yield last quarter and a 10.5% yield in the third quarter of 2021.

Sallie R. Loera