Annaly Capital Management (NLY) ended the last trading day at $23.26, up 2.47% from the previous session. This performance beat the S&P 500, which rose by 0.64%, while the Dow and Nasdaq gained 0.47% and 0.52%, respectively. In the last month, Annaly’s shares increased by 3.23%. In comparison, the Finance sector grew by 4.92%, and the S&P 500 climbed 3%. Analysts are looking forward to Annaly’s next earnings report, expecting an earnings per share (EPS) of $0.72, the same as last year.

Revenue Expectations

For the upcoming quarter, revenue is expected to reach $469 million, showing a substantial 150.41% increase compared to last year. For the year, expected earnings are $2.9 per share, and revenue is estimated at $1.24 billion, which represents changes of +7.41% and +399.6%, respectively. The Zacks Rank system evaluates stocks based on estimate revisions that affect performance. Currently, Annaly holds a Zacks Rank of #3 (Hold), with a consistent EPS estimate in the past month. The company has a Forward P/E ratio of 7.82, which is lower than the industry average of 8.99. Annaly’s PEG ratio stands at 7.11, higher than the industry average of 4.63, indicating expected earnings growth. The REIT and Equity Trust industry ranks in the top 41% of over 250 sectors based on the average Zacks Rank of stocks in those groups. Given Annaly Capital Management’s recent success compared to the S&P 500, there are signs of positive momentum leading into year-end. The upcoming earnings report is expected to be a key event for traders, likely increasing volatility and creating opportunities for options trading.

Impact Of Economic Environment

The overall economic climate significantly affects Annaly’s business, which depends on interest rate spreads. Following aggressive rate hikes in 2023 and 2024, the Federal Reserve has started a gradual easing, with two rate cuts this year, bringing the federal funds rate to 4.75%. This changing policy directly influences Annaly’s borrowing costs and asset yields, making the earnings call’s forward guidance crucial. With expectations for 150% revenue growth alongside steady earnings per share compared to last year, there may be increased pressure on the company’s net interest margin. This suggests that while Annaly is bringing in more revenue, its costs or hedging strategies could negate those gains—common in the volatile rate environment of the past 18 months. Traders could consider strategies like long straddles or strangles to benefit from the expected volatility around the earnings release, potentially profiting from significant price movements in either direction. In terms of valuation, the stock appears mixed. It trades at a discount to its industry based on Forward P/E but at a premium with its PEG ratio. Historically, the stock has traded above its tangible book value, which remained around $20 for much of 2024. Investors who expect further Fed rate cuts in 2026 might find it advantageous to purchase out-of-the-money call options as a leveraged way to capitalize on potential upside. On the downside, the high PEG ratio of 7.11 indicates that the stock’s growth prospects might not justify its current price, creating a potential risk. Any unfavorable surprises in the earnings report or guidance indicating continued margin pressure could trigger a sharp drop in stock price. Traders cautious of this risk might consider using put options to hedge against long positions or to speculate on a decline back toward historical book value levels. Create your live VT Markets account and start trading now.

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