A month has passed by for the reason that final earnings report for Ares Capital (ARCC). Shares have added about 20.9% in that timeframe, outperforming the S&P 500.
Will the current optimistic pattern proceed main as much as its subsequent earnings launch, or is Ares Capital due for a pullback? Earlier than we dive into how buyers and analysts have reacted as of late, let’s take a fast take a look at the latest earnings report to be able to get a greater deal with on the necessary catalysts.
Ares Capital Q3 Earnings Beat Estimates, Bills Rise Y/Y
Ares Capital’s third-quarter 2020 core earnings of 39 cents per share beat the Zacks Consensus Estimate by a penny. Nevertheless, the underside line declined 18.8% yr over yr.
The corporate recorded a decline in complete funding revenue together with greater bills. However, first rate portfolio exercise supported outcomes to some extent. Additional, the corporate’s liquidity place remained sturdy, which was one other optimistic.
GAAP web revenue was $441 million or $1.04 per share, up from $175 million or 41 cents per share within the prior-year quarter.
Whole Funding Revenue Declines, Bills Rise
Whole funding revenue was $352 million, down 9% yr over yr. The autumn was attributable to decrease capital structuring service charges, curiosity revenue from investments and dividend revenue. Nonetheless, the determine surpassed the Zacks Consensus Estimate of $343.Eight million.
Whole bills had been $182 million, up 1.1% from the prior-year degree.
Web funding revenue declined 21.7% yr over yr to $166 million.
Steadiness Sheet Sturdy
As of Sep 30, 2020, the corporate’s cash and cash equivalents (together with restricted cash) totaled $276 million, up from $176 million as of Dec 31, 2019.
Furthermore, Ares Capital had $4.2 billion out there for extra borrowings beneath the prevailing credit score amenities as of Sep 30, 2020. Whole excellent debt was $7.55 billion, up from $6.97 billion as of Dec 31, 2019.
As of Sep 30, 2020, Ares Capital’s complete property amounted to $14.95 billion and stockholders’ fairness was $6.96 billion.
Additional, web asset value was $16.48 per share, down from $17.32 as of Dec 31, 2019.
Portfolio Exercise Respectable
Gross commitments worth $706 million had been made in the course of the third quarter to new and present portfolio firms. This compares with $2.41 billion worth of gross commitments within the prior-year quarter.
Additional, in the course of the quarter, the corporate exited $352 million of commitments in contrast with $1.42 billion a yr in the past.
The truthful value of Ares Capital’s portfolio investments as of Sep 30, 2020, was $14.36 billion, which included $12.6 billion in accruing debt and different income-producing securities.
How Have Estimates Been Transferring Since Then?
It seems, estimates revision have trended upward in the course of the previous month.
Right now, Ares Capital has a poor Progress Rating of F, nonetheless its Momentum Rating is doing so much higher with a B. Nevertheless, the stock was allotted a grade of D on the value aspect, placing it within the backside 40% for this funding technique.
Total, the stock has an mixture VGM Rating of F. If you happen to aren’t centered on one technique, this rating is the one try to be concerned with.
Estimates have been broadly trending upward for the stock, and the magnitude of those revisions has been web zero. Notably, Ares Capital has a Zacks Rank #3 (Maintain). We count on an in-line return from the stock within the subsequent few months.
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Ares Capital Company (ARCC): Free Stock Evaluation Report
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