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Ares Capital (ARCC) Stock Gains 1.3% on Q2 Earnings Beat
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Shares of Ares Capital Corporation (ARCC - Free Report) gained 1.3%, following the release of its second-quarter 2021 results. Core earnings of 53 cents per share surpassed the Zacks Consensus Estimate of 43 cents. Moreover, the bottom line reflects a rise of 35.9% from the prior-year quarter’s reported number.
Results were aided by a rise in total investment income. Portfolio activity remained solid in the quarter. However, an increase in expenses hurt results to some extent.
GAAP net income was $478 million or $1.09 per share, up from $277 million or 65 cents per share recorded in the prior-year quarter.
Total Investment Income Improves, Expenses Rise
Total investment income was $459 million, up 31.1% year over year. The rise was driven by an increase in capital structuring service fees, dividend income and interest income from investments. The reported figure surpassed the Zacks Consensus Estimate of $386 million.
Total expenses were $277 million, up 53.9% from the prior-year level.
Net investment income increased 3.6% year over year to $171 million.
Balance Sheet Strong
As of Jun 30, 2021, the company’s cash and cash equivalents (including restricted cash) totaled $434 million, up from $326 million as of Dec 31, 2020.
Ares Capital had $5.4 billion available for additional borrowings under the existing credit facilities as of Jun 30, 2021. Total outstanding debt was $9.3 billion.
As of Jun 30, 2021, total assets amounted to $18 billion and stockholders’ equity was $8.1 billion.
Net asset value was $18.16 per share, up from $16.97 as of Dec 31, 2020.
Portfolio Activities Solid
Gross commitments worth $4.8 billion were made in the second quarter to new and existing portfolio companies. This compares with $867 million worth of gross commitments in the prior-year quarter.
In the reported quarter, the company exited $2.9 billion of commitments compared with $1.5 billion a year ago.
The fair value of Ares Capital’s portfolio investments was $17.1 billion as of Jun 30, 2021. The fair value of accruing debt and other income-producing securities was $14.9 billion.
Dividend Hike
The company declared a quarterly dividend of 41 cents per share, representing a hike of 2.5% from the prior payout. The dividend will be paid out on Sep 30 to shareholders of record as of Sep 15.
Our Take
An increase in the demand for customized financing is expected to continue supporting Ares Capital. However, elevated expense levels (as witnessed in the second quarter as well) may hurt the bottom line.
Ares Capital Corporation Price, Consensus and EPS Surprise
Gladstone Investment Corporation (GAIN - Free Report) , Main Street Capital Corporation (MAIN - Free Report) and FS KKR Capital Corp. (FSK - Free Report) are scheduled to announce quarterly results on Aug 2, Aug 5 and Aug 9, respectively.
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Ares Capital (ARCC) Stock Gains 1.3% on Q2 Earnings Beat
Shares of Ares Capital Corporation (ARCC - Free Report) gained 1.3%, following the release of its second-quarter 2021 results. Core earnings of 53 cents per share surpassed the Zacks Consensus Estimate of 43 cents. Moreover, the bottom line reflects a rise of 35.9% from the prior-year quarter’s reported number.
Results were aided by a rise in total investment income. Portfolio activity remained solid in the quarter. However, an increase in expenses hurt results to some extent.
GAAP net income was $478 million or $1.09 per share, up from $277 million or 65 cents per share recorded in the prior-year quarter.
Total Investment Income Improves, Expenses Rise
Total investment income was $459 million, up 31.1% year over year. The rise was driven by an increase in capital structuring service fees, dividend income and interest income from investments. The reported figure surpassed the Zacks Consensus Estimate of $386 million.
Total expenses were $277 million, up 53.9% from the prior-year level.
Net investment income increased 3.6% year over year to $171 million.
Balance Sheet Strong
As of Jun 30, 2021, the company’s cash and cash equivalents (including restricted cash) totaled $434 million, up from $326 million as of Dec 31, 2020.
Ares Capital had $5.4 billion available for additional borrowings under the existing credit facilities as of Jun 30, 2021. Total outstanding debt was $9.3 billion.
As of Jun 30, 2021, total assets amounted to $18 billion and stockholders’ equity was $8.1 billion.
Net asset value was $18.16 per share, up from $16.97 as of Dec 31, 2020.
Portfolio Activities Solid
Gross commitments worth $4.8 billion were made in the second quarter to new and existing portfolio companies. This compares with $867 million worth of gross commitments in the prior-year quarter.
In the reported quarter, the company exited $2.9 billion of commitments compared with $1.5 billion a year ago.
The fair value of Ares Capital’s portfolio investments was $17.1 billion as of Jun 30, 2021. The fair value of accruing debt and other income-producing securities was $14.9 billion.
Dividend Hike
The company declared a quarterly dividend of 41 cents per share, representing a hike of 2.5% from the prior payout. The dividend will be paid out on Sep 30 to shareholders of record as of Sep 15.
Our Take
An increase in the demand for customized financing is expected to continue supporting Ares Capital. However, elevated expense levels (as witnessed in the second quarter as well) may 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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Release Dates of Other Finance Stocks
Gladstone Investment Corporation (GAIN - Free Report) , Main Street Capital Corporation (MAIN - Free Report) and FS KKR Capital Corp. (FSK - Free Report) are scheduled to announce quarterly results on Aug 2, Aug 5 and Aug 9, respectively.