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Hercules Capital's (HTGC) Q4 Earnings Beat, Revenues Rise

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Hercules Capital, Inc.’s (HTGC - Free Report) fourth-quarter 2018 net investment income of 32 cents per share surpassed the Zacks Consensus Estimate of 31 cents. The figure also comes in 10.3% higher than the year-ago tally.

The company’s results reflect higher revenues and growth in investment portfolio. However, lower net asset value and rise in operating expenses were the undermining factors.

Distributional net operating income came in at $33.9 million or 35 cents per share, up from $26.1 million or 31 cents per share reported in the prior-year quarter.

For 2018, the company reported net investment income (NII) of $1.19 per share, up from the prior year’s $1.16 per share. The figure also surpassed the Zacks Consensus Estimate of $1.18.

Total Investment Income Improves, Expenses Flare Up

Total investment income for the quarter was $56.9 million, up 13.3% from the year-ago period. This upside was mainly driven by higher average debt investment balance and an overall rise in the core yield. Further, the reported figure exceeded the Zacks Consensus Estimate of $54.7 million.

Total investment income for 2018 came in at $207.8 million, up 8.8% from 2017. The figure also outpaced the Zacks Consensus Estimate of $205.5 million.

Total operating expenses for the reported quarter rose 2.4% year over year to $26.3 million. The upswing largely stemmed from higher interest expenses, general and administrative costs, and total employee-compensation costs.

Total Portfolio Value & New Commitments

The fair value of Hercules Capital’s total investment portfolio was $1.9 billion as of Dec 31, 2018.

In the reported quarter, the company provided $249.4 million in new debt and equity-financing commitments.

Balance Sheet Position

As of Dec 31, 2018, Hercules Capital’s net asset value was $9.90 per share compared with $10.38 as of Sep 30, 2018. This decline was chiefly due to a change in unrealized depreciation.

The company had $156.2 million in liquidity, including $34.2 million in unrestricted cash and cash equivalents and $122 million in credit facilities, as of Dec 31, 2018.

At the end of the fourth quarter, the weighted average cost of debt comprising interest and fees was 5.3%, down 1.1% from the prior-year quarter end.

Our Take

Hercules Capital’s loan origination activity continues to be on track. The company strategically deploys its capital while maintaining a balanced and diversified approach across various industries and sectors. However, elevated expense levels might hurt the bottom line to some extent.

Hercules Capital, Inc. Price, Consensus and EPS Surprise

 

Hercules Capital, Inc. Price, Consensus and EPS Surprise | Hercules Capital, Inc. Quote

Currently, Hercules Capital carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Results of Other Finance Stocks

Shares of Ares Capital Corporation (ARCC - Free Report) have gained 2.8%, following the release of its fourth-quarter and 2018 results. Core earnings of 45 cents per share for the quarter surpassed the Zacks Consensus Estimate of 41 cents. The bottom line also jumped 18.4% from the year-ago quarter.

Shares of Ally Financial Inc. (ALLY - Free Report) gained 5.7% following the release of the company’s fourth-quarter 2018 results. Adjusted earnings of 92 cents per share surpassed the Zacks Consensus Estimate of 82 cents. Further, the bottom line compared favorably with the prior-year quarter’s figure of 70 cents.

Shares of CIT Group Inc. gained 2.5% following the release of fourth-quarter 2018 results. Adjusted earnings from continuing operations of $1.21 per share surpassed the Zacks Consensus Estimate of $1.10. Also, the bottom line came in higher than the prior-year figure of 99 cents.

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