FBR Capital Downgrades MFA Mortgage (MFA) and Two Harbors (TWO) to Market Perform
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Analyst Jessica Levi-Ribner commented, "Following 2Q16 earnings, we are downgrading shares of MFA and TWO to Market Perform from Outperform as shares are now trading at what we believe to be fair levels. Results for 2Q16 were strong for both companies: MFA reported core EPS of $0.20, covering the $0.20 quarterly dividend, and TWO reported core EPS of $0.22, which were just below the $0.23 quarterly dividend. Both companies are executing on their respective strategic initiatives, with MFA allocating more equity to credit investments and maintaining conservative leverage, while TWO continues to grow its commercial mortgage platform and shift capital to agency securities from non-agency securities; however, we believe that potential headwinds may exist and that valuation fairly reflects progress with shares of MFA and TWO trading at ~1.00x BV and ~0.90x BV, respectively. We continue to view both companies as high-quality institutions and all things being equal could become more constructive at more attractive valuations."
Shares of MFA Mortgage closed at $7.79 yesterday.
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