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Ares Capital (ARCC) Stock Rises on Q2 Earnings Beat, Costs Dip
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Shares of Ares Capital Corporation (ARCC - Free Report) gained 1.7% following the release of its second-quarter 2022 results. Net investment income of 52 cents per share surpassed the Zacks Consensus Estimate of 43 cents. The bottom line reflected a rise of 33.3% from the prior-year quarter.
Results were aided by an increase in total investment income and lower expenses. The portfolio activity remained solid in the quarter.
GAAP net income was $111 million or 22 cents per share compared with $478 million or $1.09 per share recorded in the prior-year quarter.
Total Investment Income Increases, Expenses Decline
Total investment income was $479 million, up 4.4% year over year. The rise was driven by an increase in dividend income and interest income from investments. The top line beat the Zacks Consensus Estimate of $467.4 million.
Total expenses were $212 million, down 23.5% year over year.
Portfolio Activities Solid
Gross commitments worth $3.1 billion were made in the second quarter to new and existing portfolio companies. This compares with $4.8 billion worth of gross commitments in the prior-year quarter.
In the reported quarter, the company exited $1.1 billion of commitments compared with $2.9 billion a year ago.
The fair value of Ares Capital’s portfolio investments was $21.2 billion as of Jun 30, 2022. The fair value of accruing debt and other income-producing securities was $19.1 billion.
Balance Sheet Strong
As of Jun 30, 2022, the company’s cash and cash equivalents totaled $204 million, down from $372 million as of Dec 31, 2021.
Ares Capital had $4.4 billion available for additional borrowings under the existing credit facilities as of Jun 30, 2022. Total outstanding debt was $11.7 billion.
As of Jun 30, 2022, total assets were $21.8 billion and stockholders’ equity was $9.3 billion.
Net asset value was $18.81 per share, down from $18.96 as of Dec 31, 2021.
Dividend Hike
Concurrent with the earnings release, the company’s board of directors announced a quarterly dividend of 43 cents per share, representing a hike of 2.4% from the prior payout. The dividend will be paid out on Sep 30 to shareholders of record as of Sep 15.
Our Take
Elevated expenses (mainly due to the company's expansion strategy) will likely hurt the bottom line. While the expansion plans are expected to lead to enhanced growth prospects, the company’s profitability might be hampered. The high debt level is another key concern that makes us apprehensive.
Ares Capital Corporation Price, Consensus and EPS Surprise
Hercules Capital, Inc. (HTGC - Free Report) is scheduled to announce quarterly numbers on Jul 28.
Over the past 30 days, the Zacks Consensus Estimate for Hercules Capital’s second-quarter earnings has been unchanged at 33 cents. The estimate indicates a rise of 3.1% from the prior-year quarter’s reported number.
FS KKR Capital Corp. (FSK - Free Report) is slated to announce quarterly numbers on Aug 8.
Over the past 30 days, the Zacks Consensus Estimate for FS KKR Capital’s quarterly earnings has been unchanged at 65 cents, implying a 12.2% decline from the prior-year reported number.
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Ares Capital (ARCC) Stock Rises on Q2 Earnings Beat, Costs Dip
Shares of Ares Capital Corporation (ARCC - Free Report) gained 1.7% following the release of its second-quarter 2022 results. Net investment income of 52 cents per share surpassed the Zacks Consensus Estimate of 43 cents. The bottom line reflected a rise of 33.3% from the prior-year quarter.
Results were aided by an increase in total investment income and lower expenses. The portfolio activity remained solid in the quarter.
GAAP net income was $111 million or 22 cents per share compared with $478 million or $1.09 per share recorded in the prior-year quarter.
Total Investment Income Increases, Expenses Decline
Total investment income was $479 million, up 4.4% year over year. The rise was driven by an increase in dividend income and interest income from investments. The top line beat the Zacks Consensus Estimate of $467.4 million.
Total expenses were $212 million, down 23.5% year over year.
Portfolio Activities Solid
Gross commitments worth $3.1 billion were made in the second quarter to new and existing portfolio companies. This compares with $4.8 billion worth of gross commitments in the prior-year quarter.
In the reported quarter, the company exited $1.1 billion of commitments compared with $2.9 billion a year ago.
The fair value of Ares Capital’s portfolio investments was $21.2 billion as of Jun 30, 2022. The fair value of accruing debt and other income-producing securities was $19.1 billion.
Balance Sheet Strong
As of Jun 30, 2022, the company’s cash and cash equivalents totaled $204 million, down from $372 million as of Dec 31, 2021.
Ares Capital had $4.4 billion available for additional borrowings under the existing credit facilities as of Jun 30, 2022. Total outstanding debt was $11.7 billion.
As of Jun 30, 2022, total assets were $21.8 billion and stockholders’ equity was $9.3 billion.
Net asset value was $18.81 per share, down from $18.96 as of Dec 31, 2021.
Dividend Hike
Concurrent with the earnings release, the company’s board of directors announced a quarterly dividend of 43 cents per share, representing a hike of 2.4% from the prior payout. The dividend will be paid out on Sep 30 to shareholders of record as of Sep 15.
Our Take
Elevated expenses (mainly due to the company's expansion strategy) will likely hurt the bottom line. While the expansion plans are expected to lead to enhanced growth prospects, the company’s profitability might be hampered. The high debt level is another key concern that makes us apprehensive.
Ares Capital Corporation Price, Consensus and EPS Surprise
Ares Capital Corporation price-consensus-eps-surprise-chart | Ares Capital Corporation Quote
Currently, ARCC carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Release Dates of Other Finance Stocks
Hercules Capital, Inc. (HTGC - Free Report) is scheduled to announce quarterly numbers on Jul 28.
Over the past 30 days, the Zacks Consensus Estimate for Hercules Capital’s second-quarter earnings has been unchanged at 33 cents. The estimate indicates a rise of 3.1% from the prior-year quarter’s reported number.
FS KKR Capital Corp. (FSK - Free Report) is slated to announce quarterly numbers on Aug 8.
Over the past 30 days, the Zacks Consensus Estimate for FS KKR Capital’s quarterly earnings has been unchanged at 65 cents, implying a 12.2% decline from the prior-year reported number.