Annaly Capital Management Inc. NLY is scheduled to report third-quarter 2026 results on Oct. 20, after market close. The company’s net interest income (NII) and earnings are expected to reflect year-over-year increases in the quarter to be reported.
In the last reported quarter, the mortgage real estate investment trust's earnings available for distribution per share surpassed the Zacks Consensus Estimate. The company's net interest income and net interest margin improved year over year. The year-over-year increase in book value per share was also encouraging. However, higher economic funding costs were concerning.
Annaly has an impressive earnings surprise history. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average surprise of 3.05%.
Annaly Capital Management Inc Price and EPS Surprise
Annaly Capital Management Inc price-eps-surprise | Annaly Capital Management Inc Quote
Let us see how things have shaped up before the third-quarter earnings announcement.
The consensus estimate for third-quarter NII is pegged at $545 million, suggesting a 97.6% increase from the year-ago quarter's reported figure.
The Zacks Consensus Estimate for earnings has been unchanged at 78 cents over the past seven days. The estimate indicates a 6.9% increase from the year-ago quarter's actual.
Factors to Shape NLY’s Q3 Performance
The Federal Reserve raised its benchmark rate by 25 basis points in September to a range of 3.75-4% amid persistent inflationary pressures and resilient economic activity. In the third quarter, mortgage rates followed an upward trajectory, with the average 30-year fixed mortgage rate rising from 6.43% in early July to 7.03% by late September, according to Freddie Mac.
Elevated borrowing costs continued to weigh on housing demand and refinancing activity. Mortgage applications declined toward the end of the quarter, reflecting affordability challenges and reduced refinancing incentives.
Given this backdrop, NLY's mortgage-backed securities (MBS) portfolio is likely to have faced continued interest-rate volatility and fluctuations in agency MBS spreads during the quarter. Rising U.S. Treasury yields, driven by persistent inflation concerns and changing expectations surrounding Fed policy, are likely to have weighed on MBS valuations. Consequently, higher yields and fluctuations in mortgage spreads might have pressured the company's book value performance in the third quarter of 2026.
With mortgage rates trending higher during the quarter, refinancing activities remained subdued, particularly for borrowers holding mortgages originated at significantly lower rates. As a result, NLY's constant prepayment rates are expected to have been relatively contained, helping moderate premium amortization expenses and support net interest income.
However, higher short-term interest rates might have increased funding costs, partly offsetting the benefits of attractive reinvestment yields. The company's hedging strategies and portfolio repositioning are likely to have influenced its overall interest income performance.
Given the subdued refinancing environment and relatively contained prepayment expectations, NLY's mortgage servicing rights (MSR) portfolio is likely to have benefited in the third quarter. Higher mortgage rates generally extend the expected duration of servicing cash flows by reducing refinancing-related prepayments, potentially supporting MSR valuations. This trend, along with the company's existing servicing portfolio, is anticipated to have supported servicing fee income in the quarter to be reported.
The Zacks Consensus Estimate for net servicing income of $164.2 million indicates a year-over-year rise of 30%.
What the Zacks Model Reveals for Annaly
Our proven model does not conclusively predict an earnings beat for NLY this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: Annaly has an Earnings ESP of 0.00%.
Zacks Rank: NLY currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
REIT Stocks to Consider
Here are a couple of REIT stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time:
American Healthcare REIT, Inc. AHR is expected to release third-quarter 2026 earnings on Nov. 5. The company has an Earnings ESP of +0.60 and a Zacks Rank #2 at present.
Quarterly earnings estimates for AHR have been unchanged at 56 cents per share over the past week.
Sun Communities SUI is expected to release third-quarter 2026 earnings on Nov. 4. The company has an Earnings ESP of +3.68 and a Zacks Rank #3 at present.
Quarterly earnings estimates for AHR have been unchanged at $2.25 per share over the past week.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This innovative software-as-a-service firm upped its user base +22% year over year. That rate is increasing and margins are expanding as AI efficiencies take effect. Of course, all our elite picks aren't winners, but this one could far surpass earlier Zacks' Stocks Set to Double like D-Wave Quantum, which shot up +680.1%.
Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Annaly Capital Management Inc (NLY): Free Stock Analysis Report
Sun Communities, Inc. (SUI): Free Stock Analysis Report
American Healthcare REIT, Inc. (AHR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).