UPDATE: MLV Slashes Price Target For ARMOUR Residential REIT, Inc.
In a research report published Monday, MLV analyst Richard Eckert maintained a Hold rating on ARMOUR Residential REIT, Inc. (NYSE:ARR) and reduced the price target to $3.70 (from $4.00), to reflect the larger-than-anticipated decline in book value (BV) in the fourth-quarter and management’s estimate of further erosion of 12¢ to 20¢ a share in the current quarter.
Eckert stated, “In arriving at our estimate of fair value, we have increased the discount we have applied to projected 2015 yearend (YE) BV from 10% to 15%. Even at the lower price target resulting from the new estimates and assumptions, there is a total return potential of 27% at current valuations (16% upside potential + 11% projected dividend yield). Although we would normally find prospective returns of that size compelling, we do not believe it is commensurate with the risks attendant on an investment in ARR in what we expect to be a volatile and challenging interest rate environment–and one that has the potential to bring powerful new pressures to bear on BV. Thus, we remain on the sidelines.”
Bottom line, “Despite upside potential of 16% at our new price target and a projected dividend yield of 11% at current market values over the next twelve months, we remain neutral on ARR shares. Lending some support to this conclusion is the observation that the projected yield is now merely in line with the median peer. Investors are no longer compensated, in our estimation, for the additional risks we discern, vis-a-vis the average/median peer, in an investment in ARR.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst ARR has a total average return of 9.1% and a 87.5% success rate. Eckert has a 6.7% average return when recommending ARR, and is ranked #1003 out of 3492 analysts.