ARMOUR Residential REIT, Inc. ARR is expected to report third-quarter 2024 results on Oct. 23. The company’s results are expected to reflect growth in net interest income (NII) while earnings are expected to have declined from the year-ago reported figure.

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In the last reported quarter, this real estate investment trust (REIT), which primarily invests in residential mortgage-backed securities issued or guaranteed by a United States Government-chartered entity, posted distributable earnings of $1.08 per share. The figure surpassed the Zacks Consensus Estimate by 18.7%. Net interest income was $6.97 million in the quarter, which surpassed the Zacks Consensus Estimate by 75.5%.

Over the trailing four quarters, ARMOUR Residential REIT surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed on one occasion, the average surprise being 17.04%. The graph below depicts this surprise history:

ARMOUR Residential REIT, Inc. Price and EPS Surprise

ARMOUR Residential REIT, Inc. price-eps-surprise | ARMOUR Residential REIT, Inc. Quote

Key Factors & Estimates for ARR’s Q3 Results

The mREIT sector witnessed higher volatility in the fixed-income markets, which is likely to have increased asset impairment risks and hedging mismatches for ARR in the quarter under review. 

Nonetheless, a positively sloped yield curve is anticipated to have supported mortgage REITs’ valuations. With a steeper yield curve, mortgage REITs are likely to have witnessed a tangible book value increase as spreads on benchmark indices have tightened in the quarter. This is likely to have hiked ARR’s book value per share in the quarter to be reported.

Modest new Agency loan originations in the quarter under discussion are expected to have supported the company’s fee-based servicing portfolio. 

The 30-year fixed mortgage rates decreased to 6.2% at the end of the third quarter from 6.86% as of the second quarter of 2024 and from the high of 7.31% in the third quarter of 2023. This is likely to have resulted in a rise in mortgage demand. Supported by lower mortgage rates, refinancing activities witnessed a significant surge. Amid this, a large part of ARR Investment’s mortgage-backed securities holdings is anticipated to have witnessed elevated levels of constant prepayment rates. This is expected to have positively impacted net premium amortization in the third quarter, thereby supporting growth in interest income and average asset yield.

The consensus estimate for third-quarter NII is pegged at $10.95 million, whereas it reported $3.60 million a year ago.

On Sept. 18, the Federal Reserve cut interest rates by 50 basis points to 4.75-5% for the first time since March 2020. However, the Fed kept the interest rates at a 23-year high of 5.25-5.5% during the major part of the quarter. Given this, the company is expected to have seen higher funding costs. This is likely to have increased costs of interest-bearing liabilities for ARR in the quarter to be reported.

Lastly, there was a lack of any solid catalyst that could instill optimism before the third-quarter earnings release. The Zacks Consensus Estimate for ARR's quarterly earnings has been unchanged at 95 cents over the past month, suggesting a year-over-year decline of 12.04%.

Here is What Our Quantitative Model Predicts for ARR

ARMOUR Residential REIT does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for ARMOUR Residential REIT is 0.00%.

Zacks Rank: The company currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Release Dates of Other REITs

Two stocks from the broader REIT sector, which you may want to consider, as our model shows that these have the right combination of elements to report a surprise this time around, are American Healthcare REIT Inc. AHR and $Public Storage(PSA-N)$ PSA.

American Healthcare REIT is scheduled to report third-quarter 2024 results on Nov. 12. AHR presently has an Earnings ESP of +2.06% and flaunts a Zacks Rank of 1.

Public Storage is slated to report third-quarter results on Oct. 30. PSA currently has an Earnings ESP of +0.26% and a Zacks Rank of 3.

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Public Storage (PSA) : Free Stock Analysis Report

ARMOUR Residential REIT, Inc. (ARR) : Free Stock Analysis Report

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