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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%.
NexPoint Real Estate Finance, Inc. Price and EPS Surprise
NexPoint Real Estate Finance, Inc. price-eps-surprise | NexPoint Real Estate Finance, Inc. Quote
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%.