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Why Is Hercules Tech (HTGC) Down 4.7% Since Last Earnings Report?
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It has been about a month since the last earnings report for Hercules Technology (HTGC - Free Report) . Shares have lost about 4.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Hercules Tech due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Hercules Capital Q3 Earnings Beat, Revenue Rise Y/Y
Hercules Capital’s third-quarter 2022 net investment income of 39 cents per share surpassed the Zacks Consensus Estimate of 35 cents. The bottom line reflects a rise of 18.2% from the year-ago quarter.
Results were primarily aided by an increase in total investment income. Also, the balance sheet position remained strong and new commitments were robust. However, higher expenses hurt the results to some extent.
Net investment income was $50 million, up 31.3% year over year.
Total Investment Income Improves, Expenses Rise
Total investment income was $84.2 million, up 20% from the year-ago quarter. The top line beat the Zacks Consensus Estimate of $80 million.
Total gross operating expenses increased 7.9% year over year to $36.1 million. The rise was due to an increase in total employee compensation costs, general and administrative costs, interest expenses, and loan fees.
Portfolio Value & New Commitments Solid
The fair value of Hercules Capital’s total investment portfolio was $2.83 billion as of Sep 30, 2022.
In the third quarter, the company delivered $817.2 million in gross new debt and equity commitments, and $307.1 million in gross new fundings. It realized early loan repayments of $124.5 million.
Balance Sheet Position Strong
As of Sep 30, 2022, Hercules Capital’s net asset value was $10.47 per share compared with $11.22 as of Dec 31, 2021.
As of Sep 30, 2022, the company had $700.1 million in liquidity, including $57.1 million of unrestricted cash and cash equivalents, and $643 million in credit facilities.
At the end of the quarter, the weighted average cost of debt, comprising interest and fees, was 4.4%, down from 4.9% at the end of the prior-year quarter.
Outlook
The company anticipates record net debt investment portfolio growth to continue driving its core income and net investment income per share in the fourth quarter of 2022.
In the fourth quarter, prepayments are expected to be between $100 million and $150 million.
The company expects a core yield of 12.5-13.5% in the fourth quarter. Since approximately 95% of the company’s debt portfolio is floating with a floor, the recent interest rate hikes, along with any further hike in 2022, will benefit the core yield.
Management expects interest expenses in the fourth quarter to increase sequentially due to the balance sheet growth experienced in the third quarter.
For fourth-quarter 2022, selling, general and administrative (SG&A) expenses are anticipated to be between $20 million and $21 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 8.7% due to these changes.
VGM Scores
Currently, Hercules Tech has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Hercules Tech has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is Hercules Tech (HTGC) Down 4.7% Since Last Earnings Report?
It has been about a month since the last earnings report for Hercules Technology (HTGC - Free Report) . Shares have lost about 4.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Hercules Tech due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Hercules Capital Q3 Earnings Beat, Revenue Rise Y/Y
Hercules Capital’s third-quarter 2022 net investment income of 39 cents per share surpassed the Zacks Consensus Estimate of 35 cents. The bottom line reflects a rise of 18.2% from the year-ago quarter.
Results were primarily aided by an increase in total investment income. Also, the balance sheet position remained strong and new commitments were robust. However, higher expenses hurt the results to some extent.
Net investment income was $50 million, up 31.3% year over year.
Total Investment Income Improves, Expenses Rise
Total investment income was $84.2 million, up 20% from the year-ago quarter. The top line beat the Zacks Consensus Estimate of $80 million.
Total gross operating expenses increased 7.9% year over year to $36.1 million. The rise was due to an increase in total employee compensation costs, general and administrative costs, interest expenses, and loan fees.
Portfolio Value & New Commitments Solid
The fair value of Hercules Capital’s total investment portfolio was $2.83 billion as of Sep 30, 2022.
In the third quarter, the company delivered $817.2 million in gross new debt and equity commitments, and $307.1 million in gross new fundings. It realized early loan repayments of $124.5 million.
Balance Sheet Position Strong
As of Sep 30, 2022, Hercules Capital’s net asset value was $10.47 per share compared with $11.22 as of Dec 31, 2021.
As of Sep 30, 2022, the company had $700.1 million in liquidity, including $57.1 million of unrestricted cash and cash equivalents, and $643 million in credit facilities.
At the end of the quarter, the weighted average cost of debt, comprising interest and fees, was 4.4%, down from 4.9% at the end of the prior-year quarter.
Outlook
The company anticipates record net debt investment portfolio growth to continue driving its core income and net investment income per share in the fourth quarter of 2022.
In the fourth quarter, prepayments are expected to be between $100 million and $150 million.
The company expects a core yield of 12.5-13.5% in the fourth quarter. Since approximately 95% of the company’s debt portfolio is floating with a floor, the recent interest rate hikes, along with any further hike in 2022, will benefit the core yield.
Management expects interest expenses in the fourth quarter to increase sequentially due to the balance sheet growth experienced in the third quarter.
For fourth-quarter 2022, selling, general and administrative (SG&A) expenses are anticipated to be between $20 million and $21 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 8.7% due to these changes.
VGM Scores
Currently, Hercules Tech has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Hercules Tech has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.