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Ellington Residential Mortgage (EARN)
NYSE:EARN

Ellington Residential Mortgage (EARN) AI Stock Analysis

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Ellington Residential Mortgage

(NYSE:EARN)

Rating:52Neutral
Price Target:
Ellington Residential Mortgage's overall score reflects its mixed financial performance, with inconsistent revenue and cash flow but a stable balance sheet. Technical analysis indicates a currently weak stock trend, though valuation offers a high dividend yield. The absence of debt and strategic moves like the closed-end fund conversion are positive, but market volatility remains a risk.

Ellington Residential Mortgage (EARN) vs. SPDR S&P 500 ETF (SPY)

Ellington Residential Mortgage Business Overview & Revenue Model

Company DescriptionEllington Residential Mortgage REIT, a real estate investment trust, specializes in acquiring, investing in, and managing residential mortgage-and real estate-related assets. It acquires and manages residential mortgage-backed securities (RMBS), including agency pools and agency collateralized mortgage obligations (CMOs); and non-agency RMBS comprising non-agency CMOs, such as investment grade and non-investment grade. The company has elected to be taxed as a real estate investment trust. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to shareholders. Ellington Residential Mortgage REIT was incorporated in 2012 and is based in Old Greenwich, Connecticut.
How the Company Makes MoneyEllington Residential Mortgage REIT generates revenue primarily through interest income from its portfolio of residential mortgage-backed securities (RMBS). The company earns money from the interest payments made on the mortgages underlying the securities it owns. By investing in RMBS, EARN seeks to benefit from the spread between the income generated from its mortgage assets and the cost of financing those investments. The company also engages in hedging activities to manage interest rate risks and optimize its portfolio's performance. Significant factors contributing to its earnings include the performance of the housing market, interest rate fluctuations, and the company's ability to effectively manage its asset portfolio.

Ellington Residential Mortgage Financial Statement Overview

Summary
Ellington Residential Mortgage shows mixed financial performance. The income statement reflects inconsistent revenue with improved EBIT margins, but overall profitability is volatile. The balance sheet is stable with no debt in 2024, yet cash flow management is a concern due to fluctuating and negative free cash flows. The focus should be on stabilizing income and improving cash flow.
Income Statement
48
Neutral
Ellington Residential Mortgage experiences inconsistent revenue trends, with a notable negative revenue in 2023 but a strong recovery in 2024. The gross profit margin remains steady at 100% in 2024 due to the nature of revenue and cost structure. However, net profit margins have fluctuated significantly, reflecting operational volatility. EBIT margins improved in 2024, highlighting operational efficiency gains, but overall profitability remains inconsistent.
Balance Sheet
60
Neutral
The company's balance sheet shows a positive equity position, with stockholders' equity increasing over the years. The absence of total debt in 2024 improves the debt-to-equity ratio, enhancing financial stability. However, the equity ratio indicates moderate leverage, suggesting some risk if asset values fluctuate. Overall, the balance sheet reflects a moderate risk profile with a positive trend towards reducing leverage.
Cash Flow
42
Neutral
Ellington Residential Mortgage has shown erratic cash flow trends, with operating cash flow fluctuating and negative free cash flow in 2023 and 2024. The financing cash flow indicates significant outflows, raising concerns about sustainability. The absence of consistent positive free cash flow suggests challenges in generating sufficient cash from operations. The cash flow management needs improvement to ensure long-term financial health.
Breakdown
Dec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
15.07M-65.00K20.19M-557.00K25.94M
Gross Profit
15.07M-65.00K18.75M-1.87M24.64M
EBIT
12.96M-4.12M-15.38M-6.31M20.11M
EBITDA
0.0049.81M17.93M23.39M14.82M
Net Income Common Stockholders
6.59M4.56M-30.20M-6.31M20.11M
Balance SheetCash, Cash Equivalents and Short-Term Investments
31.84M38.53M34.82M69.03M58.17M
Total Assets
824.09M945.69M1.05B1.60B1.19B
Total Debt
0.00729.54M842.46M1.06B1.02B
Net Debt
-31.84M-38.53M807.64M995.81M957.08M
Total Liabilities
630.37M809.45M941.22M2.84M1.53M
Stockholders Equity
193.73M136.24M112.41M154.22M166.40M
Cash FlowFree Cash Flow
9.11M-10.02M22.42M27.88M24.37M
Operating Cash Flow
9.11M-10.02M22.42M27.88M24.37M
Investing Cash Flow
116.45M85.72M110.55M-15.23M304.06M
Financing Cash Flow
-132.25M-71.98M-167.18M-1.79M-305.61M

Ellington Residential Mortgage Technical Analysis

Technical Analysis Sentiment
Positive
Last Price5.58
Price Trends
50DMA
5.36
Positive
100DMA
5.80
Negative
200DMA
6.01
Negative
Market Momentum
MACD
0.06
Negative
RSI
55.35
Neutral
STOCH
52.87
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For EARN, the sentiment is Positive. The current price of 5.58 is above the 20-day moving average (MA) of 5.50, above the 50-day MA of 5.36, and below the 200-day MA of 6.01, indicating a neutral trend. The MACD of 0.06 indicates Negative momentum. The RSI at 55.35 is Neutral, neither overbought nor oversold. The STOCH value of 52.87 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for EARN.

Ellington Residential Mortgage Risk Analysis

Ellington Residential Mortgage disclosed 108 risk factors in its most recent earnings report. Ellington Residential Mortgage reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 3 New Risks
1.
The Rights Agreement that we entered into to protect our tax attributes could hinder the market for our Common Shares. Q1, 2024
2.
Our ability to utilize our net operating losses ("NOLs") and other carryforwards may be limited. Q1, 2024
3.
We may not be able to obtain the necessary approvals to convert to a registered closed end fund to be treated as a RIC. Q1, 2024

Ellington Residential Mortgage Peers Comparison

Overall Rating
UnderperformOutperform
Sector (60)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
67
Neutral
$203.58M7.738.55%11.22%36.70%-48.88%
66
Neutral
$172.46M10.076.27%12.10%-11.97%-27.40%
61
Neutral
$263.94M6.5819.15%13.42%11.78%65.73%
60
Neutral
$2.76B10.330.49%8507.90%5.95%-17.56%
58
Neutral
$216.67M6.1314.14%13.88%54.49%-17.44%
52
Neutral
$209.58M20.12-2.82%17.20%440.31%21.03%
48
Neutral
$248.62M-2.33%19.91%-52.08%10.36%
* Real Estate Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
EARN
Ellington Residential Mortgage
5.58
-0.57
-9.27%
ACRE
Ares Commercial
4.52
-1.11
-19.72%
SEVN
Seven Hills Realty Trust
11.57
0.58
5.28%
MITT
AG Mortgage
6.86
0.88
14.72%
NREF
NexPoint Real Estate ate Finance
14.90
2.77
22.84%
AOMR
Angel Oak Mortgage
9.22
-1.45
-13.59%

Ellington Residential Mortgage Earnings Call Summary

Earnings Call Date:May 20, 2025
(Q1-2025)
|
% Change Since: -0.18%|
Next Earnings Date:Aug 06, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted successful strategic moves, such as the conversion to a closed-end fund and CLO portfolio expansion. However, these were tempered by the net loss incurred due to market volatility and widening credit spreads in the CLO market. The company experienced operational success and positive outperformance in its agency mortgage strategy, but financial metrics reflected a challenging quarter.
Q1-2025 Updates
Positive Updates
Successful Conversion to Closed-End Fund
On April 1st, Ellington Credit Company completed its conversion to a registered closed-end fund, effectively selling remaining agency mortgage pools with minimal impact on net asset value.
CLO Portfolio Expansion
The company increased its CLO portfolio by 46% to $250 million during calendar Q1 and further expanded to $284 million by early May.
Agency Mortgage Strategy Outperformance
The agency mortgage strategy generated positive portfolio income of about $2.55 million for 2025, outperforming the Bloomberg US Agency MBS Index.
Net Interest Margin Increase
The overall net interest margin increased by 20 basis points to 5.27%, supported by the growing capital allocation to CLOs.
Negative Updates
Net Loss in Calendar Q1
Ellington Credit Company reported a net loss of $0.23 per share for calendar Q1, driven by declining prices on CLO mezzanine debt and equity.
Economic Return Decline
The economic return for the quarter was negative 3.2%, with a decrease in book value per share to $6.08.
CLO Market Volatility
Significant price declines in the CLO market due to widening credit spreads affected the portfolio's performance negatively during the quarter.
Company Guidance
During the Ellington Credit Company First Quarter 2025 Financial Results Conference Call, the company reported a significant transition to a registered closed-end fund as of April 1st, 2025. This strategic conversion enabled the company to liquidate agency mortgage pools and cover TBA short positions with minimal impact, estimated at a $0.01 per share effect on net asset value. In preparation for the conversion, the company expanded its CLO portfolio by 46% to $250 million. Despite experiencing a net loss of $0.23 per share in calendar Q1, the adjusted distributable earnings were $0.26 per share, with a net interest margin increase of 20 basis points to 5.27%. The book value per share at the end of March 2025 was $6.08, with an economic return of negative 3.2%. The company's CLO portfolio saw a 46% increase by March 31st, with CLO equity comprising 66% of the total CLO holdings. As they moved into fiscal Q2, the company successfully deployed additional capital into CLO investments and maintained high levels of liquidity, with $59 million in cash and cash equivalents as of April 30th, allowing for further strategic investments amid market volatility.

Ellington Residential Mortgage Corporate Events

Business Operations and StrategyRegulatory Filings and Compliance
Ellington Residential Mortgage Completes Fund Conversion
Neutral
Apr 1, 2025

On April 1, 2025, Ellington Credit Company announced the completion of its conversion to a Delaware-domiciled closed-end fund registered under the Investment Company Act of 1940. This conversion involves selling its remaining Agency MBS pools, acquiring additional corporate CLOs, and operating as a Regulated Investment Company under U.S. federal tax law. The company also plans to change its fiscal and tax year to end on March 31. The new agreements, including an Investment Advisory Agreement and an Administration Agreement, outline the management and administrative fees, which are based on the fund’s net asset value and performance. The conversion aims to enhance the company’s operational efficiency and market positioning.

Business Operations and StrategyFinancial Disclosures
Ellington Credit Reports Q4 2024 Financial Results
Neutral
Mar 12, 2025

Ellington Credit Company, previously known as Ellington Residential Mortgage, reported its financial results for the fourth quarter of 2024, highlighting a net loss of $2.0 million and adjusted distributable earnings of $7.8 million. The company has been focusing on expanding its CLO portfolio, which grew by 18% to $171.1 million by year-end, and plans to convert into a Delaware registered closed-end fund by April 1, 2025, to enhance shareholder value and focus on corporate CLO investments.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.