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FS KKR Capital (FSK) Q2 Earnings Beat Despite Higher Expenses

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FS KKR Capital Corp.’s (FSK - Free Report) second-quarter 2022 adjusted net investment income (NII) per share of 67 cents surpassed the Zacks Consensus Estimate of 65 cents. This compared unfavorably with the prior-year quarter’s 74 cents.

Results were aided by a substantial rise in total investment income. Also, portfolio activity was decent in the quarter. However, higher expenses hurt FSK’s results to some extent.

NII (GAAP basis) was $203 million, up 75% from the prior-year quarter.

Total Investment Income & Expenses Jump

Total investment income was $379 million, surging 84% from the year-ago quarter. The top line surpassed the Zacks Consensus Estimate of $378.8 million.

Total operating expenses increased significantly from $90 million to $191 million. All cost components witnessed a rise. Moreover, the company recorded a subordinated income incentive fee of $37 million in the reported quarter.

Total Portfolio Value & Balance Sheet Decent

The fair value of FS KKR Capital’s total investment portfolio was $16.2 billion as of Jun 30, 2022.

As of Jun 30, 2022, the company’s net asset value was $26.41 per share compared with $26.84 on Jun 30, 2021.
 
The company had $17.2 billion in total assets and $7.5 billion in total stockholders’ equity at the end of the second quarter. As of Jun 30, 2022, 51% of FSK’s roughly $9.3 billion of total debt was in unsecured debt and 49% in secured debt.

Our Take

Decent origination volumes are expected to support FS KKR Capital’s profitability. However, a tough operating backdrop remains a headwind.

FS KKR Capital Corp. Price, Consensus and EPS Surprise

FS KKR Capital Corp. Price, Consensus and EPS Surprise

FS KKR Capital Corp. price-consensus-eps-surprise-chart | FS KKR Capital Corp. Quote

Currently, FSK carries a Zacks Rank #4 (Sell).

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

Performance of Other Finance Companies

Hercules Capital Inc.’s (HTGC - Free Report) second-quarter 2022 net investment income of 32 cents per share missed the Zacks Consensus Estimate by a penny. The bottom line matched the year-ago quarter figure.

HTGC’s results were primarily hurt by a rise in expenses. However, an improvement in total investment income was a positive. Also, the balance sheet position remained strong and new commitments were robust.

Ares Capital Corporation’s (ARCC - Free Report) second-quarter 2022 net investment income of 52 cents per share surpassed the Zacks Consensus Estimate of 43 cents. The bottom line reflected a rise of 33.3% from the prior-year quarter.

ARCC’s results were aided by an increase in total investment income and lower expenses. The portfolio activity remained solid in the quarter.


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