MLV & Co Downgrades ARMOUR Residential REIT

MLV & Co downgraded ARMOUR Residential REIT, Inc. (NYSE: ARR) from Buy to Hold and cut its price target from $4.50 to $4.00.

Analyst Richard Eckert noted that the “lower rating is a product of the diminished upside potential represented by our new price target...and the smaller yield we are projecting as a result of last week's dividend cut.

“At the new total return potential of 19.5 percent (6.7 percent price appreciation potential + 12.8 percent projected yield at current market values), we believe the risks and rewards attendant on an investment in ARR shares are fairly balanced and the stock fairly priced.”

Eckert explained that “prior to 2013, both ARR and its agency mREIT peers--as well as the broader residential mREIT universe--traded at 100 percent or more of book value. But over the last two years, ARR shares have traded, on average, at 83 percent of book value, while a composite of its agency peers has traded at an average of 89.3 percent of book value.” As a result, the firm calibrated its estimate of fair value at 90 percent of book value.

ARMOUR Residential REIT closed at $3.74, up 1.36 percent.