Invesco Mortgage Capital Q1 loss as book value drops 7.3%, risk sentiment improves

Overview

• U.S. mortgage REIT reported Q1 net loss, reversing profit from prior quarter

• Earnings available for distribution per share held steady at $0.55 vs $0.56 in Q4

• Company cites higher rate volatility and Agency RMBS underperformance for book value decline

Outlook

• Company says risk sentiment has improved entering Q2, supported by lower interest rate volatility

• Company expects Agency RMBS net issuance to remain manageable and GSE demand to stay steady

• Company sees a more constructive backdrop for Agency RMBS holdings as spread levels widen

Result Drivers

• AGENCY RMBS UNDERPERFORMANCE - Co said higher coupon Agency RMBS underperformed Treasuries, weighing on results

• INTEREST RATE VOLATILITY - Rising geopolitical tensions, higher energy prices and renewed inflation concerns drove increased interest rate volatility and pushed U.S. Treasury yields higher, per incoming CEO Kevin Collins

• SWAP SPREAD TIGHTENING - Co said swap spread tightening also contributed to book value decline

Company press release: ID:nPn3fhDhLa

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "hold" and the breakdown of recommendations is 1 "strong buy" or "buy", 4 "hold" and 1 "sell" or "strong sell"

• The average consensus recommendation for the specialized reits peer group is "buy."

• Wall Street's median 12-month price target for Invesco Mortgage Capital Inc is $8.25, about 2% above its April 29 closing price of $8.09

• The stock recently traded at 4 times the next 12-month earnings vs. a P/E of 4 three months ago

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