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Ares Capital (ARCC) Q4 Earnings Beat Estimates, Stock Down 1.2%
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Ares Capital Corporation’s (ARCC - Free Report) fourth-quarter 2021 net investment income of 52 cents per share beat the Zacks Consensus Estimate of 50 cents. The bottom line, however, reflected a fall of 3.7% from the prior-year quarter.
The results were aided by a rise in total investment income. Portfolio activity remained solid in the quarter. However, an increase in expenses was the undermining factor. This was perhaps the reason for bearish investor sentiments, as the stock was down 1.2% following the release.
GAAP net income was $382 million or 83 cents per share compared with $378 million or 89 cents per share recorded in the prior-year quarter.
In 2021, net investment income per share of $1.66 lagged the Zacks Consensus Estimate of $1.94. Also, the bottom line declined 11.2% from the previous year. GAAP net income was $1.57 billion or $3.51 per share, up substantially from $484 million or $1.14 per share in 2020.
Total Investment Income Improves, Expenses Rise
Total investment income in the quarter was $529 million, up 20.2% year over year. The rise was driven by an increase in capital structuring service fees, dividend income and interest income from investments. The top line outpaced the Zacks Consensus Estimate of $485.3 million.
In 2021, total investment income was $1.82 billion, up 20.5% from the 2020 level. Also, the top line handily beat the Zacks Consensus Estimate of $1.78 billion.
Total quarterly expenses were $279 million, jumping 36.7%.
Portfolio Activities Solid
Gross commitments worth $5.87 billion were made in the fourth quarter to new and existing portfolio companies. This compares with $3.86 billion worth of gross commitments in the prior-year quarter.
In the reported quarter, the company exited $3.87 billion of commitments compared with $3.03 billion a year ago.
The fair value of Ares Capital’s portfolio investments was $20 billion as of Dec 31, 2021. The fair value of accruing debt and other income-producing securities was $18.18 billion.
Balance Sheet Strong
As of Dec 31, 2021, the company’s cash and cash equivalents totaled $372 million, up from $254 million as of Dec 31, 2020.
Ares Capital had $4.1 billion available for additional borrowings under the existing credit facilities as of Dec 31, 2021. Total outstanding debt was $11.1 billion.
As of Dec 31, 2021, total assets were $20.84 billion and stockholders’ equity was $8.87 billion.
Net asset value was $18.86 per share, up from $16.97 as of Dec 31, 2020.
Our Take
An increase in the demand for customized financing is expected to continue supporting Ares Capital. However, elevated expense levels will likely hurt the bottom line.
Ares Capital Corporation Price, Consensus and EPS Surprise
BGC Partners, Inc. is scheduled to announce quarterly numbers on Feb 16.
Over the past 30 days, the Zacks Consensus Estimate for BGC Partners’ quarterly earnings has moved 6.3% north to 17 cents, suggesting a 30.8% increase from the prior-year reported number.
Hercules Capital, Inc. (HTGC - Free Report) is scheduled to announce quarterly numbers on Feb 22.
Over the past 30 days, the Zacks Consensus Estimate for Hercules Capital has been unchanged at 33 cents. This indicates a fall of 10.8% from the prior-year quarter reported number.
FS KKR Capital Corp. (FSK - Free Report) is slated to announce quarterly numbers on Feb 28.
Over the past 30 days, the Zacks Consensus Estimate for FS KKR Capital’s quarterly earnings has been unchanged at 62 cents, implying a 13.9% decline from the prior-year reported number.
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Ares Capital (ARCC) Q4 Earnings Beat Estimates, Stock Down 1.2%
Ares Capital Corporation’s (ARCC - Free Report) fourth-quarter 2021 net investment income of 52 cents per share beat the Zacks Consensus Estimate of 50 cents. The bottom line, however, reflected a fall of 3.7% from the prior-year quarter.
The results were aided by a rise in total investment income. Portfolio activity remained solid in the quarter. However, an increase in expenses was the undermining factor. This was perhaps the reason for bearish investor sentiments, as the stock was down 1.2% following the release.
GAAP net income was $382 million or 83 cents per share compared with $378 million or 89 cents per share recorded in the prior-year quarter.
In 2021, net investment income per share of $1.66 lagged the Zacks Consensus Estimate of $1.94. Also, the bottom line declined 11.2% from the previous year. GAAP net income was $1.57 billion or $3.51 per share, up substantially from $484 million or $1.14 per share in 2020.
Total Investment Income Improves, Expenses Rise
Total investment income in the quarter was $529 million, up 20.2% year over year. The rise was driven by an increase in capital structuring service fees, dividend income and interest income from investments. The top line outpaced the Zacks Consensus Estimate of $485.3 million.
In 2021, total investment income was $1.82 billion, up 20.5% from the 2020 level. Also, the top line handily beat the Zacks Consensus Estimate of $1.78 billion.
Total quarterly expenses were $279 million, jumping 36.7%.
Portfolio Activities Solid
Gross commitments worth $5.87 billion were made in the fourth quarter to new and existing portfolio companies. This compares with $3.86 billion worth of gross commitments in the prior-year quarter.
In the reported quarter, the company exited $3.87 billion of commitments compared with $3.03 billion a year ago.
The fair value of Ares Capital’s portfolio investments was $20 billion as of Dec 31, 2021. The fair value of accruing debt and other income-producing securities was $18.18 billion.
Balance Sheet Strong
As of Dec 31, 2021, the company’s cash and cash equivalents totaled $372 million, up from $254 million as of Dec 31, 2020.
Ares Capital had $4.1 billion available for additional borrowings under the existing credit facilities as of Dec 31, 2021. Total outstanding debt was $11.1 billion.
As of Dec 31, 2021, total assets were $20.84 billion and stockholders’ equity was $8.87 billion.
Net asset value was $18.86 per share, up from $16.97 as of Dec 31, 2020.
Our Take
An increase in the demand for customized financing is expected to continue supporting Ares Capital. However, elevated expense levels will likely 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, the company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Dates Other Finance Stocks
BGC Partners, Inc. is scheduled to announce quarterly numbers on Feb 16.
Over the past 30 days, the Zacks Consensus Estimate for BGC Partners’ quarterly earnings has moved 6.3% north to 17 cents, suggesting a 30.8% increase from the prior-year reported number.
Hercules Capital, Inc. (HTGC - Free Report) is scheduled to announce quarterly numbers on Feb 22.
Over the past 30 days, the Zacks Consensus Estimate for Hercules Capital has been unchanged at 33 cents. This indicates a fall of 10.8% from the prior-year quarter reported number.
FS KKR Capital Corp. (FSK - Free Report) is slated to announce quarterly numbers on Feb 28.
Over the past 30 days, the Zacks Consensus Estimate for FS KKR Capital’s quarterly earnings has been unchanged at 62 cents, implying a 13.9% decline from the prior-year reported number.