Compass Point Sees Few Catalysts And High Valuation For Western Asset Mortgage Capital

In a report published Monday, Compass Point analyst Jason Stewart reiterated a Neutral rating and $15.00 price target on Western Asset Mortgage Capital (NYSE: WMC).

In the report, Compass Point noted, "We reiterate our Neutral rating and $15 target price following WMC's 4Q14 earnings release. Core earnings per share of $0.65 came in below our estimate of $0.67 and book value per share (BVPS) declined slightly more than anticipated due to derivative losses. In addition to core earnings, WMC earned $0.22 per share in drop income, which was not included in our estimates. Non-Agency holdings will continue to benefit book value during a period of supply contraction as will the whole loan program as it remains in its infancy. Over time, this should translate into higher average margins and book value growth, but we note that it may take several quarters to see the fruits of this transition. With rates near the low end of the recent range we expect core earnings expansion to be limited near term. With shares trading at approximately 4Q14 book value per share, we reiterate our Neutral rating on valuation until the EPS growth picture and timeline gains clarity."

Western Asset Mortgage Capital closed on Friday at $15.00.