NexPoint Real Estate Finance, Inc. NREF is scheduled to report third-quarter 2024 results on Oct. 31. The company’s revenues and earnings are expected to have improved from the year-ago level. 

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In the last reported quarter, this real estate investment trust (REIT), which focuses on originating and servicing loans for multifamily, single-family rental, self-storage, life science, hospitality and office sectors, posted earnings available for distribution per share of 68 cents, beating the Zacks Consensus Estimate of 45 cents. Net interest income was $6.74 million in the second quarter compared with the Zacks Consensus Estimate of $3.39 million.

NexPoint Real Estate Finance has a disappointing earnings surprise history. Its earnings surpassed estimates in only one of the trailing four quarters and missed thrice. The average surprise is 9.46%.

Key Factors to Influence NREF in Q3

The mREIT sector witnessed higher volatility in the fixed-income markets during the third quarter, which is likely to have increased asset impairment risks and hedging mismatches 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 increased NREF’s book value per share in the quarter under review.

The 30-year fixed mortgage rates decreased to 6.2% at the end of the third quarter from 6.86% in second-quarter 2024 and from the high of 7.31% in third-quarter 2023. This is likely to have resulted in a rise in mortgage demand. Supported by the lower mortgage rates, refinancing activities witnessed a significant surge. Amid this, a significant portion of NREF’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.

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 a major part of the quarter. Given this, the company is expected to have seen higher funding costs. This is likely to have affected net interest income (NII) growth of NREF in the to-be-reported quarter. The Zacks Consensus Estimate for NII is pegged at $5.36 million, indicating a 20.5% decrease from the prior quarter.

However, the company’s activities in the third quarter were sufficient to gain analysts’ confidence. As a result, the Zacks Consensus Estimate for third-quarter earnings has remained unchanged at 49 cents in the past seven days, indicating a year-over-year increase of 14%.

What Our Model Unveils for NREF

Per our model, it cannot conclusively be predicted that NexPoint Real Estate Finance will beat the Zacks Consensus Estimate this time around. This is because the company lacks the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat.

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

Earnings ESP: The Earnings ESP for NexPoint Real Estate Finance is 0.00%.

Zacks Rank: NREF currently carries a Zacks Rank #3.

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 an earnings beat this time around, are American Healthcare REIT Inc. AHR and $Public Storage(PSA-N)$ PSA.

American Healthcare REIT has an Earnings ESP of +1.56% and flaunts a Zacks Rank of 1 at present. AHR is scheduled to report third-quarter 2024 results on Nov. 12. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

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