Armour Residential REIT (ARR) Plunges 0.82% to Multi-Month Low as High Leverage Concerns Offset Earnings Surge

The share price fell to its lowest level so far this month, with an intraday decline of 0.82%.

Armour Residential REIT (ARR) reported a sharp quarterly turnaround in profitability, with revenue rising from negative to $172.54 million and net income surging to $159.26 million. Despite these gains, the stock hit a multi-month low amid concerns over its leverage. ARR’s debt-to-equity ratio stands at 781%, far exceeding industry norms, raising questions about its ability to manage borrowing costs in a rising interest rate environment. The REIT’s net profit margin of 55% and trailing twelve months (TTM) earnings per share of $0.65 highlight operational efficiency, but its reliance on debt financing amplifies sensitivity to rate hikes.

Analysts note that ARR’s business model—leveraging low-cost debt to finance mortgage-backed securities—is under pressure as interest rates remain elevated. A 3.75% TTM return on investment underscores the challenge of generating returns relative to its capital base. While quarterly revenue per share climbed to $11.48, the high debt load and narrow net interest margin leave the company vulnerable to margin compression. Investors are weighing short-term earnings strength against long-term risks, including potential refinancing costs and credit rating downgrades. The recent selloff reflects a revaluation of ARR’s risk profile, with market participants pricing in heightened volatility as macroeconomic uncertainties persist.