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Owl Rock Capital (ORCC) Down 10% as Q1 Earnings Miss Estimates

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Owl Rock Capital Corporation (ORCC - Free Report) shares have declined 9.9% since it reported first-quarter 2022 earnings on May 4, wherein earnings missed the Zacks Consensus Estimate. Investor sentiments might have been hurt by an elevated operating expense level, primarily due to a 27.7%, 12.6% and 19.2% rise in interest expense, management fee and performance-based incentive fees, respectively.

Interest expenses witnessed an uptick due to higher average daily borrowings, partly mitigated by reduced average interest rate. Meanwhile, management and incentive fees increased mainly due to the growth of the investment portfolio.

The downside was partly offset by higher investment income stemming from improved dividend income and interest income. Higher incremental fee income led to the growth of the other income metric (a component of investment income) as well.

Q1 Update

Owl Rock Capital reported first-quarter 2022 earnings per share of 31 cents, which lagged the Zacks Consensus Estimate by 6.1%. The bottom line, however, improved 19.2% year over year.

Total investment income of ORCC amounted to $264.2 million, which climbed 19.2% year over year in the first quarter. However, the figure fell short of the consensus mark by 3.2%.

New investment commitments were $530.4 million across 17 new portfolio companies. The metric plunged 38.6% year over year in the quarter under review.

Owl Rock Capital ended the first quarter with investments in 157 portfolio companies backed with an aggregate fair value of $12.8 billion. Based on the fair value, the average investment size in each portfolio company was $81.3 million as of Mar 31, 2022.

Total expenses escalated nearly 20% year over year to $141 million in the first quarter.

Net income of $44 million declined to nearly four-fold year over year due to reporting of net realized losses in the quarter under review, while the prior-year quarter witnessed net realized gains of $55.2 million.

Financial Update (as of Mar 31, 2022)

Owl Rock Capital exited the first quarter with cash and restricted cash of $332.8 million, which slumped 25.6% sequentially (from the figure as of Dec 31, 2021). Total assets of $13.2 billion slipped 0.7% sequentially.

Debt dipped 0.6% sequentially to $7 billion. ORCC had $1.4 billion of undrawn capacity under its credit facilities. It currently has no debt maturities until April 2024.

Net cash used in operating activities during the first quarter-end was $13.5 million, which is way lower than the prior-year quarter’s cash usage of $225 million.

At the quarter-end, net debt to equity deteriorated 4 basis points sequentially to 1.17x.

Dividend Update

The board of directors at Owl Rock Capital approved a second-quarter dividend of 31 cents per share. The dividend will be paid out on or before Aug 15, 2022, to shareholders of record as of Jun 30, 2022.

Q2 2022 Outlook

Repayment activity is anticipated to remain subdued in the second quarter.

Second Half of 2022 Guidance

As most of Owl Rock Capital’s assets are floating in nature, an improving interest rate environment is projected to drive net investment income in the second half of 2022. Deal activity witnessing a turnaround in the second half of this year is likely to provide a boost to ORCC's repayment income during the same time frame.

Zacks Rank

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

Other Finance Sector Releases

Of the Finance sector players that have reported first-quarter results so far, the bottom line of Synchrony Financial (SYF - Free Report) , American Express Company (AXP - Free Report) and Cboe Global Markets, Inc. (CBOE - Free Report) beat the Zacks Consensus Estimate.

Synchrony Financial reported first-quarter 2022 adjusted EPS of $1.73, which surpassed the Zacks Consensus Estimate of $1.53 by 13.1%. The bottom line of SYF remained flat with the year-ago period. Its net interest income increased 10.2% year over year to $3,789 million for the quarter under review. It beat the Zacks Consensus Estimate of $3,764 million. The other income of Synchrony Financial declined by 17.6% year over year to $108 million.

American Express reported first-quarter 2022 earnings of $2.73 per share, which beat the Zacks Consensus Estimate by 12.3%. However, AXP’s bottom line decreased by 0.4% year over year. For the reported quarter, American Express’ total revenues, net of interest expenses, increased 29% year over year to $11.7 billion due to higher Card Member spending. The top line surpassed the Zacks Consensus Estimate by 0.4%. The network volumes of American Express jumped 30% year over year to $350.3 billion for the first quarter.

CBOE Global delivered first-quarter 2022 adjusted earnings of $1.73 per share, beating the Zacks Consensus Estimate by 3.6%. The bottom line increased 13.1% year over year. Total revenues of CBOE were $418.1 million, which beat the Zacks Consensus Estimate by 2.2%. The top line increased 14.4% year over year. CBOE Global’s options revenues increased 21% year over year to $219.2 million.