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Ares Capital (ARCC) Up on Q2 Earnings Beat as Revenues Rise
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Shares of Ares Capital Corporation (ARCC - Free Report) gained 1.9% following the release of its second-quarter 2024 results. Core earnings of 61 cents per share beat the Zacks Consensus Estimate of 58 cents. The bottom line reflects a rise of 5.2% from the prior-year quarter.
Results were primarily driven by an improvement in the total investment income. Also, the company’s portfolio activity was robust in the quarter. However, an increase in expenses acted as an undermining factor.
GAAP net income was $332 million or 52 cents per share, down from $331 million or 61 cents per share in the prior-year quarter. We projected a net income of $441.4 million.
Total Investment Income Improves, Expenses Rise
Total investment income was $755 million, jumping 19.1% year over year. The rise was largely driven by an increase in interest income from investments, capital structuring service fees and dividend income. The top line surpassed the Zacks Consensus Estimate of $714.3 million.
Total quarterly expenses were $356 million, up 13.4% year over year. Our estimate for the metric was $378.7 million.
Portfolio Activities Robust
In the second quarter, the company made gross commitments worth $3.86 billion to new and existing portfolio companies. This compares with $1.22 billion of gross commitments in the prior-year quarter.
Further, the company exited $1.38 billion of commitments compared with $1.14 billion a year ago.
The fair value of Ares Capital’s portfolio investments was $25 billion as of Jun 30, 2024. The fair value of accruing debt and other income-producing securities was $22.5 billion.
Balance Sheet Strong
As of Jun 30, 2024, the company’s cash and cash equivalents totaled $601 million, down from $535 million as of Dec 31, 2023.
Ares Capital had $4.5 billion available for additional borrowings under the existing credit facilities as of Jun 30, 2024. Total outstanding debt was $13 billion.
As of Jun 30, 2024, total assets were $26.1 billion and stockholders’ equity was $12.4 billion. Our estimate for total assets was $24.3 billion. We projected stockholders’ equity of $11.5 billion.
Net asset value was $19.61 per share, up from $19.24 as of Dec 31, 2023.
Our Take
Driven by a rise in the demand for customized financing, growth in total investment income is expected to continue in the quarters ahead. Increased investment commitments will likely keep supporting the company’s financials. However, its expansion strategies might lead to a rise in costs in the near term, which is expected to hurt the bottom line.
Ares Capital Corporation Price, Consensus and EPS Surprise
LendingTree, Inc.’s (TREE - Free Report) second-quarter 2024 adjusted net income per share of 54 cents missed the Zacks Consensus Estimate of 73 cents. The reported figure compares unfavorably with $1.14 reported in the prior-year quarter.
The results were affected by a lower liquidity level and a decline in EBITDA. However, a rise in revenues and lower costs acted as tailwinds for TREE.
Sallie Mae’s (SLM - Free Report) , formally SLM Corporation, second-quarter 2024 earnings per share of $1.11 surpassed the Zacks Consensus Estimate of 79 cents. The bottom line compared favorably with the prior-year quarter’s $1.10 per share.
Lower provisions for credit losses and robust loan originations were positives. However, a decline in the net interest income and a rise in non-interest expenses impeded SLM’s results.
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Ares Capital (ARCC) Up on Q2 Earnings Beat as Revenues Rise
Shares of Ares Capital Corporation (ARCC - Free Report) gained 1.9% following the release of its second-quarter 2024 results. Core earnings of 61 cents per share beat the Zacks Consensus Estimate of 58 cents. The bottom line reflects a rise of 5.2% from the prior-year quarter.
Results were primarily driven by an improvement in the total investment income. Also, the company’s portfolio activity was robust in the quarter. However, an increase in expenses acted as an undermining factor.
GAAP net income was $332 million or 52 cents per share, down from $331 million or 61 cents per share in the prior-year quarter. We projected a net income of $441.4 million.
Total Investment Income Improves, Expenses Rise
Total investment income was $755 million, jumping 19.1% year over year. The rise was largely driven by an increase in interest income from investments, capital structuring service fees and dividend income. The top line surpassed the Zacks Consensus Estimate of $714.3 million.
Total quarterly expenses were $356 million, up 13.4% year over year. Our estimate for the metric was $378.7 million.
Portfolio Activities Robust
In the second quarter, the company made gross commitments worth $3.86 billion to new and existing portfolio companies. This compares with $1.22 billion of gross commitments in the prior-year quarter.
Further, the company exited $1.38 billion of commitments compared with $1.14 billion a year ago.
The fair value of Ares Capital’s portfolio investments was $25 billion as of Jun 30, 2024. The fair value of accruing debt and other income-producing securities was $22.5 billion.
Balance Sheet Strong
As of Jun 30, 2024, the company’s cash and cash equivalents totaled $601 million, down from $535 million as of Dec 31, 2023.
Ares Capital had $4.5 billion available for additional borrowings under the existing credit facilities as of Jun 30, 2024. Total outstanding debt was $13 billion.
As of Jun 30, 2024, total assets were $26.1 billion and stockholders’ equity was $12.4 billion. Our estimate for total assets was $24.3 billion. We projected stockholders’ equity of $11.5 billion.
Net asset value was $19.61 per share, up from $19.24 as of Dec 31, 2023.
Our Take
Driven by a rise in the demand for customized financing, growth in total investment income is expected to continue in the quarters ahead. Increased investment commitments will likely keep supporting the company’s financials. However, its expansion strategies might lead to a rise in costs in the near term, which is expected to hurt the bottom line.
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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Finance Stocks
LendingTree, Inc.’s (TREE - Free Report) second-quarter 2024 adjusted net income per share of 54 cents missed the Zacks Consensus Estimate of 73 cents. The reported figure compares unfavorably with $1.14 reported in the prior-year quarter.
The results were affected by a lower liquidity level and a decline in EBITDA. However, a rise in revenues and lower costs acted as tailwinds for TREE.
Sallie Mae’s (SLM - Free Report) , formally SLM Corporation, second-quarter 2024 earnings per share of $1.11 surpassed the Zacks Consensus Estimate of 79 cents. The bottom line compared favorably with the prior-year quarter’s $1.10 per share.
Lower provisions for credit losses and robust loan originations were positives. However, a decline in the net interest income and a rise in non-interest expenses impeded SLM’s results.