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Ares Capital (ARCC) Q3 Earnings Beat, Expenses Rise Y/Y

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Ares Capital Corporation’s (ARCC - Free Report) third-quarter 2021 core earnings of 47 cents per share beat the Zacks Consensus Estimate of 45 cents. The bottom line reflected a rise of 20.5% from the prior-year quarter.

The results were aided by a rise in total investment income. Portfolio activity remained solid in the quarter. However, an increase in expenses was the undermining factor.

GAAP net income was $334 million or 73 cents per share, down from $441 million or $1.04 per share recorded in the prior-year quarter.

Total Investment Income Improves, Expenses Rise

Total investment income was $442 million, up 25.6% year over year. The rise was driven by an increase in capital structuring service fees, dividend income, and interest income from investments. The top line outpaced the Zacks Consensus Estimate of $438 million.

Total expenses were $253 million, jumping 39%.

Net investment income increased 10.8% to $184 million.

Balance Sheet Strong

As of Sep 30, 2021, the company’s cash and cash equivalents (including restricted cash) totaled $1.21 billion, up from $326 million as of Dec 31, 2020.

Ares Capital had $5.1 billion available for additional borrowings under the existing credit facilities as of Sep 30, 2021. Total outstanding debt was $9.9 billion.

As of Sep 30, 2021, total assets amounted to $19.15 billion and stockholders’ equity was $8.54 billion.

Net asset value was $18.52 per share, up from $16.97 as of Dec 31, 2020.

Portfolio Activities Solid

Gross commitments worth $3.11 billion were made in the third quarter to new and existing portfolio companies. This compares with $706 million worth of gross commitments in the prior-year quarter.

In the reported quarter, the company exited $2.26 billion of commitments compared with $352 million a year ago.

The fair value of Ares Capital’s portfolio investments was $17.68 billion as of Sep 30, 2021. The fair value of accruing debt and other income-producing securities was $15.67 billion.

Our Take

An increase in the demand for customized financing is expected to continue supporting Ares Capital. However, elevated expense levels will likely hurt the bottom line.
 

Ares Capital Corporation Price, Consensus and EPS Surprise

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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Dates Other Finance Stocks

Hercules Capital, Inc. (HTGC - Free Report) , TriplePoint Venture Growth BDC Corp. (TPVG - Free Report) , and Apollo Investment Corporation (AINV - Free Report) are slated to announce quarterly numbers of Oct 28, Nov 3, and Nov 4, respectively.