Annaly Capital Management (NLY)

Mortgage finance REIT Annaly Capital Management (NYSE:NLY) reported Q4 CY2025 results topping the market’s revenue expectations, with sales up 74.8% year on year to $921.8 million. Its GAAP profit of $1.40 per share was 66.7% above analysts’ consensus estimates.

Company Overview

Operating as a real estate investment trust since 1996 with a focus on generating income from interest rate spreads, Annaly Capital Management (NYSE:NLY) is a diversified capital manager that invests in agency mortgage-backed securities, residential mortgage loans, and mortgage servicing rights.

Thrifts & Mortgage Finance institutions operate by accepting deposits and extending loans primarily for residential mortgages, earning revenue through interest rate spreads (difference between lending rates and borrowing costs) and origination fees. The industry benefits from demographic tailwinds as millennials enter prime homebuying age, technological advancements streamlining the loan approval process, and potential interest rate stabilization improving affordability. However, significant headwinds include net interest margin compression during rate volatility, increased competition from fintech disruptors offering digital-first experiences, mounting regulatory compliance costs, and potential housing market corrections that could impact loan portfolios and default rates.

Annaly's main competitors include other mortgage REITs such as AGNC Investment Corp (NASDAQ:AGNC), Starwood Property Trust (NYSE:STWD), and New Residential Investment Corp (NYSE:NRZ), as well as diversified REITs and financial institutions that invest in mortgage-backed securities.

Net interest income and and fee-based revenue are the two pillars supporting bank earnings. The former captures profit from the gap between lending rates and deposit costs, while the latter encompasses charges for banking services, credit products, wealth management, and trading activities. Annaly Capital Management struggled to consistently generate demand over the last five years as its revenue dropped at a 12.9% annual rate. This was below our standards and is a sign of poor business quality.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Annaly Capital Management’s recent performance shows its demand remained suppressed as its revenue has declined by 46% annually over the last two years. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Annaly Capital Management reported magnificent year-on-year revenue growth of 74.8%, and its $921.8 million of revenue beat Wall Street’s estimates by 26.3%.

Net interest income made up 69.8% of the company’s total revenue during the last five years, meaning lending operations are Annaly Capital Management’s largest source of revenue.

Net interest income commands greater market attention due to its reliability and consistency, whereas non-interest income is often seen as lower-quality revenue that lacks the same dependable characteristics.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Annaly Capital Management’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Annaly Capital Management, its two-year annual EPS growth of 66.4% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q4, Annaly Capital Management reported EPS of $1.40, up from $0.78 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Annaly Capital Management’s full-year EPS of $2.78 to grow 18.7%.

The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.

This explains why tangible book value per share (TBVPS) stands as the premier banking metric. TBVPS strips away questionable intangible assets, revealing concrete per-share net worth that investors can trust. Other (and more commonly known) per-share metrics like EPS can sometimes be murky due to M&A or accounting rules allowing for loan losses to be spread out.

Annaly Capital Management’s TBVPS declined at a 10.6% annual clip over the last five years. However, TBVPS growth has accelerated recently, growing by 2% annually over the last two years from $19.41 to $20.21 per share.

Over the next 12 months, Consensus estimates call for Annaly Capital Management’s TBVPS to remain flat at roughly $20.33, a disappointing projection.

Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, Annaly Capital Management has averaged an ROE of 7.8%, uninspiring for a company operating in a sector where the average shakes out around 7.5%.

It was good to see Annaly Capital Management beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. On the other hand, its net interest income missed. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $24.38 immediately after reporting.

Updated: January 28, 2026 at 5:24 PM EST

When considering an investment in Annaly Capital Management, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Annaly Capital Management falls short of our quality standards. For starters, its revenue has declined over the last five years. And while its estimated net interest income growth for the next 12 months is great, the downside is its TBVPS has declined over the last five years. On top of that, its net interest margin limits its operating profit potential compared to other banks that can earn more, all else equal..

Annaly Capital Management’s P/B ratio based on the next 12 months is 1.2x. While this valuation is reasonable, we don’t see a big opportunity at the moment. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $23.52 on the company (compared to the current share price of $24.38).