Tuesday, Jones Trading maintained a Buy rating on AGNC Investment Corp (NASDAQ:AGNC) but lowered the stock price target to $10.25 from $10.75. The adjustment follows AGNC's first-quarter results, which revealed a total economic return of 5.7%.
The company's core earnings per share (EPS) of $0.58 exceeded both the firm's estimate of $0.56 and the consensus estimate of $0.57. Additionally, the reported GAAP EPS of $0.59 surpassed expectations as spreads tightened slightly during the quarter.
AGNC's tangible book value per share (BVPS) saw an increase of 161 basis points quarter-over-quarter, ending at $8.84, up from $8.70. Still, it has since declined approximately 8% quarter-to-date to $8.13 due to increased volatility and spreads widening around 15 basis points quarter-to-date.
The company's leverage ratio was slightly higher at the end of the first quarter, standing at 7.1x compared to 7.0x at the end of the fourth quarter of 2023, and as of today, it is 7.4x.
The firm noted a decline in the annualized net interest spread by 10 basis points quarter-over-quarter to 298 basis points from 308 basis points. This was attributed to the cost of funds increasing more than the yield on earning assets.
AGNC's investment portfolio expanded by 5.1% quarter-over-quarter to $63.3 billion, driven by a $3.0 billion increase in holdings of To-Be-Announced (TBA) securities, raising the total to $8.4 billion. Investments in Agency Mortgage-Backed Securities (MBS) and Credit Risk Transfer (CRT)/non-agency remained relatively stable.
The analysts expect AGNC's core earnings to continue supporting the company's current monthly dividend of $0.12. The new price target of $10.25 is based on approximately 1.05 times the estimated fiscal year-end 2024 BVPS of $9.03 and a pro-forma dividend yield of 13.4%. If the price target is met, it represents a potential total return opportunity of 27%.
InvestingPro Insights
In light of the recent analysis by Jones Trading, current data from InvestingPro further informs the investment landscape for AGNC Investment Corp. Notably, AGNC's market capitalization stands at $6.75 billion, underlining its significant presence in the sector.
The company's P/E ratio is currently 9.7, offering an attractive entry point for value investors when considered alongside the anticipated net income and sales growth this year, as highlighted by InvestingPro Tips.
This is especially relevant given the company's dividend yield of 15.65%, which is considerable for income-focused investors. Moreover, AGNC has demonstrated a robust revenue growth rate of 237.72% over the last twelve months as of Q1 2024, showcasing its strong financial performance.
InvestingPro Tips also reveal that AGNC has maintained dividend payments for 17 consecutive years, suggesting a commitment to returning value to shareholders. Additionally, analysts predict the company will remain profitable this year, which is supported by a gross profit margin of 100% over the last twelve months as of Q1 2024.
For those interested in further insights, InvestingPro offers a range of additional tips, including a detailed analysis of the company's short-term obligations compared to its liquid assets. To access these insights and more, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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