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Hercules Capital (HTGC) Q4 Earnings Beat, Revenues Rise Y/Y

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Hercules Capital Inc.’s (HTGC - Free Report) fourth-quarter 2020 net investment income of 37 cents per share surpassed the Zacks Consensus Estimate of 33 cents. However, the bottom line declined 2.6% from the year-ago reported figure.

Results were aided by an improvement in total investment income. Moreover, the balance sheet position remained strong during the quarter. Nonetheless, a rise in operating expenses was a headwind.

Net investment income was $42.2 million, up 5.1% from the prior-year quarter.

For 2020, net investment income came in at $157.1 million or $1.39 per share compared with $143.3 million or $1.41 per share recorded in the previous year. The Zacks Consensus Estimate for net investment income per share was $1.35.

Total Investment Income Improves, Expenses Rise

Quarterly total investment income was $75.3 million, up 6.7% from the year-ago quarter. The upside was mainly driven by higher average debt investment balance and fee income from higher early loan repayments. The top line also surpassed the Zacks Consensus Estimate of $70.2 million.

For the year, total investment income was $287.3 million, up 7.2% year over year. The figure surpassed the Zacks Consensus Estimate of $282.1 million.

Total quarterly operating expenses flared up 8.8% year over year to $33.2 million. The rise resulted from an increase in all cost components.

Portfolio Value & New Commitments Solid

The fair value of Hercules Capital’s total investment portfolio was $2.35 billion as of Dec 31, 2020.

In the reported quarter, the company delivered $150.8 million in new debt and equity commitments as well as realized early loan repayments of $282.3 million.

Balance Sheet Position Strong

As of Dec 31, 2020, Hercules Capital’s net asset value was $11.26 per share compared with $10.55 on Dec 31, 2019.

The company had $673.3 million in liquidity — including $198.3 million of unrestricted cash and cash equivalents, and $475 million in credit facilities — as of Dec 31, 2020.

At the end of the fourth quarter, the weighted average cost of debt — comprising interest and fees — was 5.2%, up from 5% in the prior-year quarter end.

Our Take

Hercules Capital’s loan origination activity continues to be on track, which will likely support top-line growth in the quarters ahead. Nevertheless, as the company continues to undertake efforts to improve originations; expenses are expected to keep flaring up, thereby, hurting profits to an extent.

Hercules Capital, Inc. Price, Consensus and EPS Surprise

Hercules Capital, Inc. Price, Consensus and EPS Surprise

Hercules Capital, Inc. price-consensus-eps-surprise-chart | 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.

Performance & Earnings Release Dates of Other Finance Stocks

Ares Capital Corp.’s (ARCC - Free Report) fourth-quarter 2020 core earnings of 54 cents per share surpassed the Zacks Consensus Estimate of 40 cents. Moreover, the bottom line reflects a rise of 20% year over year.

Main Street Capital Corp. (MAIN - Free Report) and FS KKR Capital Corp. (FSK - Free Report) are scheduled to announce results on Feb 25 and Mar 1, respectively.

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