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Blue Owl Capital (OBDC) Up 11.5% in 6 Months: What Lies Ahead?
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Shares of Blue Owl Capital Corporation (OBDC - Free Report) have jumped 11.5% in the past six months compared with the 9.8% growth of the industry it belongs to, thanks to increasing investment income and portfolio growth. The high interest rate environment and its diversified portfolio with balanced weightage in various industries have created prudent investment opportunities.
Blue Owl Capital, with a market capitalization of $5.8 billion, is a specialty finance company that lends funds to U.S. middle market companies. The business development company also boasts a prudent capital deployment history. These factors collectively contributed to this Zacks Rank #2 (Buy) company's notable price appreciation.
Image Source: Zacks Investment Research
Can it Retain Momentum?
The ingredients are there, and now let’s get into the details and show you how its estimates for the coming days stand.
The Zacks Consensus Estimate for OBDC’s 2023 earnings is pegged at $1.91 per share, which witnessed one upward estimate revision and no downward movement in the past month. The estimate indicates a 35.5% year-over-year increase. Blue Owl Capital beat on earnings in all the last four quarters, with an average surprise of 3.4%.
The consensus mark for full-year 2023 revenues stands at nearly $1.6 billion, suggesting a 30.4% rise from the prior-year reported number. Our estimate indicates a significant increase in interest income, which is likely to support the top-line growth.
We expect the company’s non-controlled interest income to rise by nearly 29% year over year in 2023. As a significant portion of its assets are floating in nature, the high-interest rate environment is projected to have driven its investment income for full-year 2023.
Despite expectations of rate cuts by the Fed in 2024, OBDC is less likely to be significantly affected, thanks to its diversified portfolio. While other industry players may experience substantial declines in interest income, OBDC's operations, characterized by predictability, minimal risk and robust cash flows, are expected to provide a stable foundation.
The consensus estimate for 2024 full-year revenues suggests a flat performance year over year despite the expected volatility. Additionally, the consensus projection for the bottom line in 2024 is set at $1.89 per share. This resilience can result in further price appreciation for Blue Owl Capital.
The company’s focus on increasing shareholder value is supported by its cash-generating ability. Apart from providing regular dividends, OBDC also offers a quarterly supplemental dividend. It hiked the fourth-quarter 2023 basic dividend by 2 cents to 35 cents per share. Its dividend yield of 9.3% is significantly higher than the industry average of 2.2%. Also, its share repurchase fund has $100 million remaining.
Risks
Despite the upside potential, there are a few factors that investors should keep an eye on.
Its rising expenses on the back of higher interest costs and incentive fees will constrain profit growth. We expect total operating expenses to jump more than 26% for full-year 2023. Also, its return on equity of 12.1% is lower than the industry average of 19.8%. Nevertheless, we believe that a systematic and strategic plan of action will drive OBDC’s growth in the long term.
The consensus mark for Alerus Financial’s 2023 full year earnings is pegged at $1.60 per share, which remained stable over the past week. ALRS beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 16.6%.
The Zacks Consensus Estimate for Burford Capital’s 2023 full-year earnings has improved 16% over the past 60 days. Also, the consensus mark for BUR’s revenues in full-year 2023 is pegged at $936 million, suggesting 193.2% year-over-year growth.
The Zacks Consensus Estimate for FlexShopper’s 2023 full-year earnings has improved 21.9% in the past 60 days. It has witnessed one upward estimate revision against none in the opposite direction during this time. The consensus mark for FPAY’s revenues in full-year 2023 is pegged at $114.8 million, suggesting 1.5% year-over-year growth.
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Blue Owl Capital (OBDC) Up 11.5% in 6 Months: What Lies Ahead?
Shares of Blue Owl Capital Corporation (OBDC - Free Report) have jumped 11.5% in the past six months compared with the 9.8% growth of the industry it belongs to, thanks to increasing investment income and portfolio growth. The high interest rate environment and its diversified portfolio with balanced weightage in various industries have created prudent investment opportunities.
Blue Owl Capital, with a market capitalization of $5.8 billion, is a specialty finance company that lends funds to U.S. middle market companies. The business development company also boasts a prudent capital deployment history. These factors collectively contributed to this Zacks Rank #2 (Buy) company's notable price appreciation.
Image Source: Zacks Investment Research
Can it Retain Momentum?
The ingredients are there, and now let’s get into the details and show you how its estimates for the coming days stand.
The Zacks Consensus Estimate for OBDC’s 2023 earnings is pegged at $1.91 per share, which witnessed one upward estimate revision and no downward movement in the past month. The estimate indicates a 35.5% year-over-year increase. Blue Owl Capital beat on earnings in all the last four quarters, with an average surprise of 3.4%.
The consensus mark for full-year 2023 revenues stands at nearly $1.6 billion, suggesting a 30.4% rise from the prior-year reported number. Our estimate indicates a significant increase in interest income, which is likely to support the top-line growth.
We expect the company’s non-controlled interest income to rise by nearly 29% year over year in 2023. As a significant portion of its assets are floating in nature, the high-interest rate environment is projected to have driven its investment income for full-year 2023.
Despite expectations of rate cuts by the Fed in 2024, OBDC is less likely to be significantly affected, thanks to its diversified portfolio. While other industry players may experience substantial declines in interest income, OBDC's operations, characterized by predictability, minimal risk and robust cash flows, are expected to provide a stable foundation.
The consensus estimate for 2024 full-year revenues suggests a flat performance year over year despite the expected volatility. Additionally, the consensus projection for the bottom line in 2024 is set at $1.89 per share. This resilience can result in further price appreciation for Blue Owl Capital.
The company’s focus on increasing shareholder value is supported by its cash-generating ability. Apart from providing regular dividends, OBDC also offers a quarterly supplemental dividend. It hiked the fourth-quarter 2023 basic dividend by 2 cents to 35 cents per share. Its dividend yield of 9.3% is significantly higher than the industry average of 2.2%. Also, its share repurchase fund has $100 million remaining.
Risks
Despite the upside potential, there are a few factors that investors should keep an eye on.
Its rising expenses on the back of higher interest costs and incentive fees will constrain profit growth. We expect total operating expenses to jump more than 26% for full-year 2023. Also, its return on equity of 12.1% is lower than the industry average of 19.8%. Nevertheless, we believe that a systematic and strategic plan of action will drive OBDC’s growth in the long term.
Other Key Picks
Some other top-ranked stocks in the broader Finance space are Alerus Financial Corporation (ALRS - Free Report) , Burford Capital Limited (BUR - Free Report) and FlexShopper, Inc. (FPAY - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus mark for Alerus Financial’s 2023 full year earnings is pegged at $1.60 per share, which remained stable over the past week. ALRS beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 16.6%.
The Zacks Consensus Estimate for Burford Capital’s 2023 full-year earnings has improved 16% over the past 60 days. Also, the consensus mark for BUR’s revenues in full-year 2023 is pegged at $936 million, suggesting 193.2% year-over-year growth.
The Zacks Consensus Estimate for FlexShopper’s 2023 full-year earnings has improved 21.9% in the past 60 days. It has witnessed one upward estimate revision against none in the opposite direction during this time. The consensus mark for FPAY’s revenues in full-year 2023 is pegged at $114.8 million, suggesting 1.5% year-over-year growth.