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Why You Should Add Blue Owl Capital (OBDC) to Your Portfolio
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Blue Owl Capital Corporation (OBDC - Free Report) is well-poised to grow on the back of portfolio growth and a high-interest rate environment, which is boosting its investment income. Its strategic acquisitions enhance business strength.
Blue Owl Capital — with a market cap of $5.7 billion — is a specialty finance company that lends funds to U.S. middle market companies. Courtesy of solid prospects, this stock is worth buying at the moment.
Zacks Rank & Price Performance
OBDC currently sports a Zacks Rank #1 (Strong Buy). In the past year, the stock has gained 20.4% compared with the industry’s growth of 6%.
Image Source: Zacks Investment Research
Rising Estimates
The Zacks Consensus Estimate for OBDC’s 2023 earnings is pegged at $1.91 per share, which remained stable in the past week. The estimate indicates a 35.5% year-over-year increase. Blue Owl Capital beat on earnings in all the last four quarters, with an average surprise of 3.4%.
The consensus mark for current-year revenues stands at $1.6 billion, suggesting a 30.4% rise from the prior-year reported number. Our estimate indicates a significant increase in interest income, which is likely to support the top-line growth.
Key Drivers
We expect the company’s interest income to rise nearly 28.7% year over year in 2023. As a significant portion of its assets are floating in nature, the high-interest rate environment is projected to drive its investment income in 2023. Our estimate for this year’s total investment income signals 30% year-over-year growth. The company expects repayment activity to increase as the rate environment stabilizes, thereby resulting in improved income for OBDC and enabling it to pursue new opportunities.
The company’s focus on increasing shareholder value is commendable. Apart from providing regular dividends, Blue Owl Capital also offers a quarterly supplemental dividend. Its dividend yield of 9% is significantly higher than the industry average of 2.1%.
OBDC possesses a diversified portfolio with balanced weightage in different industries. This is expected to keep the company on its growth path, even in tough times. Its investments in Senior Secured loans enable it to avoid the impacts of volatility.
However, its rising expenses on the back of higher interest costs will constrain bottom-line growth. We expect total operating expenses to jump 26.4% this year. Also, its return on equity of 12.1% is lower than the industry average of 15.3%. Nevertheless, we believe that a systematic and strategic plan of action will drive OBDC’s growth in the long term.
The consensus mark for Primerica’s current-year earnings indicates a 39.9% year-over-year increase. Furthermore, the consensus estimate for PRI’s revenues in 2023 suggests 3.2% year-over-year growth.
The Zacks Consensus Estimate for Reinsurance Group of America’s current-year earnings has improved 3.4% in the past 30 days. The consensus mark for RGA’s current-year earnings and revenues indicates 36% and 10.1% year-over-year growth, respectively.
The consensus mark for Aflac’s current-year earnings indicates an 18.2% year-over-year increase. The Zacks Consensus Estimate for AFL’s current-year earnings has improved 1.1% in the past 30 days.
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Why You Should Add Blue Owl Capital (OBDC) to Your Portfolio
Blue Owl Capital Corporation (OBDC - Free Report) is well-poised to grow on the back of portfolio growth and a high-interest rate environment, which is boosting its investment income. Its strategic acquisitions enhance business strength.
Blue Owl Capital — with a market cap of $5.7 billion — is a specialty finance company that lends funds to U.S. middle market companies. Courtesy of solid prospects, this stock is worth buying at the moment.
Zacks Rank & Price Performance
OBDC currently sports a Zacks Rank #1 (Strong Buy). In the past year, the stock has gained 20.4% compared with the industry’s growth of 6%.
Image Source: Zacks Investment Research
Rising Estimates
The Zacks Consensus Estimate for OBDC’s 2023 earnings is pegged at $1.91 per share, which remained stable in the past week. The estimate indicates a 35.5% year-over-year increase. Blue Owl Capital beat on earnings in all the last four quarters, with an average surprise of 3.4%.
The consensus mark for current-year revenues stands at $1.6 billion, suggesting a 30.4% rise from the prior-year reported number. Our estimate indicates a significant increase in interest income, which is likely to support the top-line growth.
Key Drivers
We expect the company’s interest income to rise nearly 28.7% year over year in 2023. As a significant portion of its assets are floating in nature, the high-interest rate environment is projected to drive its investment income in 2023. Our estimate for this year’s total investment income signals 30% year-over-year growth. The company expects repayment activity to increase as the rate environment stabilizes, thereby resulting in improved income for OBDC and enabling it to pursue new opportunities.
The company’s focus on increasing shareholder value is commendable. Apart from providing regular dividends, Blue Owl Capital also offers a quarterly supplemental dividend. Its dividend yield of 9% is significantly higher than the industry average of 2.1%.
OBDC possesses a diversified portfolio with balanced weightage in different industries. This is expected to keep the company on its growth path, even in tough times. Its investments in Senior Secured loans enable it to avoid the impacts of volatility.
However, its rising expenses on the back of higher interest costs will constrain bottom-line growth. We expect total operating expenses to jump 26.4% this year. Also, its return on equity of 12.1% is lower than the industry average of 15.3%. Nevertheless, we believe that a systematic and strategic plan of action will drive OBDC’s growth in the long term.
Other Stocks to Consider
Some other top-ranked stocks from the broader Finance space are Primerica, Inc. (PRI - Free Report) , Reinsurance Group of America, Incorporated (RGA - Free Report) and Aflac Incorporated (AFL - Free Report) . Each stock presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus mark for Primerica’s current-year earnings indicates a 39.9% year-over-year increase. Furthermore, the consensus estimate for PRI’s revenues in 2023 suggests 3.2% year-over-year growth.
The Zacks Consensus Estimate for Reinsurance Group of America’s current-year earnings has improved 3.4% in the past 30 days. The consensus mark for RGA’s current-year earnings and revenues indicates 36% and 10.1% year-over-year growth, respectively.
The consensus mark for Aflac’s current-year earnings indicates an 18.2% year-over-year increase. The Zacks Consensus Estimate for AFL’s current-year earnings has improved 1.1% in the past 30 days.