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On Tuesday, JMP Securities adjusted its rating for Granite Point Mortgage Trust (NYSE:), downgrading the stock from Market Outperform to Market Perform following the company’s fourth-quarter financial results. Granite Point reported a larger-than-expected loss for the quarter, prompting the firm to revise its stance on the stock.
Granite Point Mortgage Trust disclosed significant losses in its fourth-quarter earnings report, with a GAAP loss of $0.33 per share and a distributable loss of $0.52 per share. These figures fell short of the consensus loss estimate of $0.29 per share and were below the analyst’s own projection of $0.42 per share. The company’s GAAP earnings were impacted by an additional credit loss provision of $21.6M, or $0.42 per share. Meanwhile, distributable earnings were affected by a $33.3M write-off related to a San Diego office loan resolution.
The reported losses meant that Granite Point’s distributable earnings did not cover its quarterly dividend of $0.20. Excluding the loan write-off, the distributable earnings per share (EPS) would have been $0.14, indicating a dividend coverage ratio of 70%. The company’s GAAP book value per share also declined to $12.91 from $13.28 as of September 30, primarily due to the additional provision for loan losses.
As of the market close on February 16, Granite Point’s shares were trading at $4.71. This price represents a significant discount at just 0.36 times the reported fourth-quarter book value of $12.91, considerably below the 0.76 times median price-to-book value (P/BV) multiple of its commercial mortgage REIT peers. The firm noted that while this discount was a key reason for the previously higher rating, the current valuation reflects a fair market price, given the uncertainties surrounding the company’s loan loss exposures.
Granite Point held its earnings conference call on February 15, where management discussed the quarterly results. For those interested in revisiting the discussion, a replay is available with the dial-in number (877) 660-6853 and the passcode: 13743745.
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