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Ares Capital (ARCC) Up 0.4% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Ares Capital (ARCC - Free Report) . Shares have added about 0.4% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ares Capital due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Ares Capital Q2 Earnings Beat Estimates, Costs Rise Y/Y
Ares Capital’s second-quarter 2021 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.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Ares Capital has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Ares Capital has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Ares Capital (ARCC) Up 0.4% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Ares Capital (ARCC - Free Report) . Shares have added about 0.4% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ares Capital due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Ares Capital Q2 Earnings Beat Estimates, Costs Rise Y/Y
Ares Capital’s second-quarter 2021 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.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Ares Capital has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Ares Capital has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.