Dynex Capital Inc. Earnings Cheat Sheet: Four Quarters of Rising Profit Now Broken

Dynex Capital Inc. (NYSE:DX) reported its results for the third quarter. Dynex Capital is a real estate investment trust that invests in mortgage loans and securities on a leveraged basis.

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Dynex Capital Earnings Cheat Sheet for the Third Quarter

Results: Net income for Dynex Capital Inc. fell to $1.5 million (4 cents per share) vs. $7 million (33 cents per share) a year earlier. This is a decline of 78.2% from the year earlier quarter.

Actual vs. Wall St. Expectations: DX reported adjusted net income of 32 cents per share. By that measure, the company beat the mean estimate of 31 cents per share.

Quoting Management: Thomas Akin, Chairman and Chief Executive Officer, commented, “We are pleased with our results; our strategy of investment in high quality, short duration assets has proven invaluable given the volatility experienced in the third quarter. Mortgage REITs face a myriad of challenges today and our conservative approach makes it substantially less challenging to manage a leveraged bond portfolio. We had several items weighing down the results for the third quarter such as litigation costs, but excluding these items we delivered solid results. By entering into the litigation settlement, we were able to remove a significant contingency. We have now refinanced $23.7 million in collateralized financings, as referenced in our press release of October 4, 2011, which could save the Company as much as $2.0 million annually in interest and amortization costs. We have another $50.5 million of collateralized financings that we may refinance based on current market conditions and repurchase agreement financing terms which could save the Company an additional $0.6 million annually in interest costs. We believe our high-quality, diversified investment portfolio is positioned to deliver consistent earnings and minimal book value volatility going forward. We invite our shareholders to join our call tomorrow as we review the results for the quarter and the investment portfolio in greater detail.”

Key Stats:

Last quarter’s profit decrease breaks a streak of four consecutive quarters of year-over-year profit increases. In the second quarter, net income rose 87.1% from the year earlier, while the figure increased 85.7% in the first quarter, more than twofold in the fourth quarter of the last fiscal year and 17% in the third quarter of the last fiscal year.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the fourth quarter has moved down from 34 cents a share to 33 cents over the last sixty days. The average estimate for the fiscal year is $1.28 per share, falling from $1.33 thirty days ago.

Competitors to Watch: PennyMac Mortgage Investment Trust (NYSE:PMT), Redwood Trust, Inc. (NYSE:RWT), Anworth Mortgage Asset Corp. (NYSE:ANH), New York Mortgage Trust, Inc. (NASDAQ:NYMT), ARMOUR Residential REIT, Inc. (AMEX:ARR), American Capital Agency Corp. (NASDAQ:AGNC) and MFA Financial, Inc. (NYSE:MFA).

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(Source: Xignite Financials)