New Residential (NRZ:$7.00) reports Q1 core EPS 48c, consensus of -17 cents
"Ahead of the unprecedented volatility in March 2020, our Company was positioned for a very strong Q1 quarter," said Michael Nierenberg, Chairman, CEO. "The world changed swiftly following our investor update on March 13. Subsequent to that update, asset values in the mortgage market went into freefall as liquidity left the system. In response, we sold down approximately $28B in assets and significantly de-leveraged our balance sheet. Our investment portfolio as of April 30 is 61% smaller than it was on December 31, 2019, which we believe puts us in a strong position to navigate the current and forward environment. Importantly, we have continued to bolster our capital position and improve financing capacity; as of April 30 we have an estimated $520M in cash and $400M in unencumbered assets. In particular, we have increased our advance financing capacity up to approximately $5.25B. Looking ahead, our investment strategy will be to target assets that are term financed or low leverage. Our primary focus will be on our operating business, which includes our mortgage origination, servicing and ancillary service business lines. We believe that in today's low interest rate environment, these businesses are particularly well-positioned to contribute to our profitability. We intend to support our investments, be opportunistic, and continue to do all we can to generate returns for our shareholders. We look forward to growing book value and returning our Company to normalcy."
BMR Take: We continue to believe in the company and especially the CEO, Michael Nierenberg. They have weathered a storm of unprecedented illiquidity and come out the other side. The preferreds that we have spoken of have come back from the $10 level and below to the $18-20 level. Remember, in normal times they generally trade around $25. NRZ.PR.A has a 7.5% coupon and is trading at $20 for a yield of 9.38%. NRZ.PR.B has a 7.12% coupon and trades at $19 for a yield of 9.35%. NRZ.PR.C has a coupon of 6.37% and trades at $18 for a yield of 8.8%. If normalcy returns, you can add another 25% to your overall return. A lot of "ifs" here, but we trust you get our point.
Note that we would suggest you use limits if you are buying the preferreds. The bid-ask spread is very high in our opinion and caution should be taken with market orders. Todd Shaver has a position in the common and in the preferreds.