NEW YORK (TheStreet) -- Western Asset Mortgage Capital (WMC) is down 5.44% to $14.60 Friday morning after the company announced a public offering of 13,000,000 shares of common stock to $15.44 per share late Thursday night.
The mortgage company is estimating $193 million in gross proceeds.
The company has also given underwriters the option to buy up to 1,950,000 additional shares of common stock. The offering is expected to close April 9, 2014.
Western Asset Mortgage Capital says they intend to use the net proceeds of the offering primarily to purchase Agency RMBS (residential mortgage-backed securities), Non-Agency RMBS and CMBS (commercial mortgage-backed securities), focusing primarily on Agency RMBS and for general corporate purposes.
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TheStreet Ratings team rates WESTERN ASSET MTG CAPITAL CP as a Sell with a ratings score of E+. TheStreet Ratings Team has this to say about their recommendation:
"We rate WESTERN ASSET MTG CAPITAL CP (WMC) a SELL. This is based on several weak investment measures, which should drive this stock to significantly underperform the majority of stocks that we rate. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Real Estate Investment Trusts (REITs) industry. The net income has decreased by 16.4% when compared to the same quarter one year ago, dropping from $24.82 million to $20.76 million.
- Looking at the price performance of WMC's shares over the past 12 months, there is not much good news to report: the stock is down 33.41%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- WESTERN ASSET MTG CAPITAL CP's earnings per share declined by 20.2% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, WESTERN ASSET MTG CAPITAL CP swung to a loss, reporting -$1.18 versus $3.76 in the prior year. This year, the market expects an improvement in earnings ($2.58 versus -$1.18).
- WMC, with its very weak revenue results, has greatly underperformed against the industry average of 6.9%. Since the same quarter one year prior, revenues plummeted by 129.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, WESTERN ASSET MTG CAPITAL CP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: WMC Ratings Report