Angel Oak Mortgage (AOMR) Reports First Quarter Loss, Estimates Lag Revenue

Angel Oak Mortgage (AOMR) came out with quarterly loss of $0.37 per share versus the Zacks Consensus Estimate of $0.20. For comparison, a year earlier earnings per share were $1.49. These numbers have been adjusted for one-off items.

This quarterly report presented an earnings surprise of -285%. A quarter ago, it was expected that this real estate finance company would post earnings of $0.29 per share when it actually produced a loss of $2.50, delivering a surprise of -962.07%.

The company has topped consensus EPS estimates twice over the last four quarters.

Angel Oak, which belongs to the Zacks Financial – Mortgage & Associate Services industry, posted revenues of $23.74 million for the quarter ended March 2023, declining 18%, in line with the Zacks Consensus Estimate. For comparison, revenues from the previous year amounted to $27.11 million. The company has failed to beat consensus revenue estimates over the last four quarters.

The sustainability of the immediate share price movement based on the recently-released numbers and future earnings expectations will mostly depend on management’s commentary on the earnings call.

Year-to-date, Angel Oak shares are up about 52.9% compared to the S&P 500’s gain of 6.5%.

What’s next for Angel Oak?

While Angel Oak has outperformed the market this year, the question that comes to investors’ minds is: what’s next for the stock?

There are no simple answers to this key question, but one reliable measure that can help investors address this issue is the company’s earnings prospects. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of the earnings release, the estimate revision trend for Angel Oak is unfavorable. While the magnitude and direction of estimate revisions may change following the company’s just-released earnings report, the current status translates into the stock’s Zacks Rank #4 (Sell). Therefore, it can be expected that the company’s shares will underperform the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the next quarters and the current fiscal year change in the coming days. The current consensus EPS estimate is $0.27 on $30.23 million in revenues for the coming quarter and $1.06 on $124.78 million in revenues for the current fiscal year.

Investors should be aware that the outlook for the industry may also have a significant impact on share prices. In terms of the Zacks Industry Rank, Financial Services – Mortgage & Related is currently in the bottom 8% of the 250+ Zacks industries. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Another company in the same industry, Essent Group (ESNT), has not yet released results for the quarter ending March 2023. The results are expected to be released on May 5.

The mortgage insurance and reinsurance holding company is expected to post quarterly earnings per share of $1.43 in its upcoming report, representing a year-over-year change of -43.3%. The consensus EPS estimate for the quarter has not changed over the last 30 days.

Essent Group’s revenue is expected to be $245.57 million, down 7.2% from the year-ago quarter.

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