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Ares Capital (ARCC) Gains on Q4 Earnings Beat, Revenue Rise
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Shares of Ares Capital Corporation (ARCC - Free Report) gained 1.3% following the release of its fourth-quarter and 2023 results. Quarterly core earnings of 63 cents per share surpassed the Zacks Consensus Estimate of 59 cents. The bottom line was in line with the prior-year quarter’s figure.
Results were primarily aided by an improvement in the total investment income. Also, the company’s portfolio activity was robust in the quarter. However, an increase in expenses hurt the results to some extent.
GAAP net income was $413 million or 72 cents per share, up from $174 million or 34 cents per share in the prior-year quarter. We projected net income of $495.9 million.
For 2023, core earnings of $2.37 per share surpassed the Zacks Consensus Estimate of $2.34. The bottom line increased 17.3% from 2022. GAAP net income was $1.52 billion or $2.75 per share, up from $600 million or $1.21 per share in the previous year. We projected net income of $1.60 billion.
Total Investment Income Improves, Expenses Rise
Total investment income for the quarter was $707 million, up 10.5% year over year. The rise was driven by an increase in interest income from investments and dividend income. The top line beat the Zacks Consensus Estimate of $683.5 million.
The full-year total investment income was $2.61 billion, up 24.7% year over year. The top line beat the Zacks Consensus Estimate of $2.59 billion.
Total quarterly expenses were $353 million, up 29.3% year over year. Our estimate for the metric was $384.2 million.
Portfolio Activities Robust
Gross commitments worth $2.4 billion were made in the fourth quarter to new and existing portfolio companies. This compares with $2.5 billion of gross commitments in the prior-year quarter. We projected gross commitments worth $1.5 billion.
In the reported quarter, the company exited $1.4 billion of commitments compared with $2.3 billion a year ago. Our estimate was pegged at $1.3 billion.
The fair value of Ares Capital’s portfolio investments was $22.9 billion as of Dec 31, 2023. The fair value of accruing debt and other income-producing securities was $20.4 billion.
Balance Sheet Strong
As of Dec 31, 2023, the company’s cash and cash equivalents totaled $535 million, up from $303 million as of Dec 31, 2022.
Ares Capital had $4.9 billion available for additional borrowings under the existing credit facilities as of Dec 31, 2023. Total outstanding debt was $11.9 billion.
As of Dec 31, 2023, total assets were $23.8 billion and stockholders’ equity was $11.2 billion. Our estimate for total assets was $23.7 billion. We projected stockholders’ equity of $10.8 billion.
Net asset value was $19.24 per share, up from $18.40 as of Dec 31, 2022.
Our Take
Driven by a rise in the demand for customized financing, growth in total investment income is expected to continue in the quarters ahead. Increased investment commitments will likely keep supporting the company’s financials. However, its expansion strategies will likely lead to a rise in costs in the near term, which is expected to hurt the bottom line.
Ares Capital Corporation Price, Consensus and EPS Surprise
LPL Financial’s (LPLA - Free Report) fourth-quarter 2023 adjusted earnings of $3.51 per share handily surpassed the Zacks Consensus Estimate of $3.33. The bottom line reflects a year-over-year decline of 17%.
Results benefited from robust improvement in revenues, partly offset by an increase in expenses. LPLA recorded growth in brokerage and advisory assets, which acted as a tailwind.
Charles Schwab’s (SCHW - Free Report) fourth-quarter 2023 adjusted earnings of 68 cents per share beat the Zacks Consensus Estimate of 65 cents. The bottom line, however, declined 36% from the prior-year quarter.
SCHW’s results benefited from the solid performance of the asset management business. The absence of fee waivers and solid brokerage account numbers acted as tailwinds in the quarter. However, lower revenues due to higher funding costs and lower volatility posed a major headwind for SCHW.
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Ares Capital (ARCC) Gains on Q4 Earnings Beat, Revenue Rise
Shares of Ares Capital Corporation (ARCC - Free Report) gained 1.3% following the release of its fourth-quarter and 2023 results. Quarterly core earnings of 63 cents per share surpassed the Zacks Consensus Estimate of 59 cents. The bottom line was in line with the prior-year quarter’s figure.
Results were primarily aided by an improvement in the total investment income. Also, the company’s portfolio activity was robust in the quarter. However, an increase in expenses hurt the results to some extent.
GAAP net income was $413 million or 72 cents per share, up from $174 million or 34 cents per share in the prior-year quarter. We projected net income of $495.9 million.
For 2023, core earnings of $2.37 per share surpassed the Zacks Consensus Estimate of $2.34. The bottom line increased 17.3% from 2022. GAAP net income was $1.52 billion or $2.75 per share, up from $600 million or $1.21 per share in the previous year. We projected net income of $1.60 billion.
Total Investment Income Improves, Expenses Rise
Total investment income for the quarter was $707 million, up 10.5% year over year. The rise was driven by an increase in interest income from investments and dividend income. The top line beat the Zacks Consensus Estimate of $683.5 million.
The full-year total investment income was $2.61 billion, up 24.7% year over year. The top line beat the Zacks Consensus Estimate of $2.59 billion.
Total quarterly expenses were $353 million, up 29.3% year over year. Our estimate for the metric was $384.2 million.
Portfolio Activities Robust
Gross commitments worth $2.4 billion were made in the fourth quarter to new and existing portfolio companies. This compares with $2.5 billion of gross commitments in the prior-year quarter. We projected gross commitments worth $1.5 billion.
In the reported quarter, the company exited $1.4 billion of commitments compared with $2.3 billion a year ago. Our estimate was pegged at $1.3 billion.
The fair value of Ares Capital’s portfolio investments was $22.9 billion as of Dec 31, 2023. The fair value of accruing debt and other income-producing securities was $20.4 billion.
Balance Sheet Strong
As of Dec 31, 2023, the company’s cash and cash equivalents totaled $535 million, up from $303 million as of Dec 31, 2022.
Ares Capital had $4.9 billion available for additional borrowings under the existing credit facilities as of Dec 31, 2023. Total outstanding debt was $11.9 billion.
As of Dec 31, 2023, total assets were $23.8 billion and stockholders’ equity was $11.2 billion. Our estimate for total assets was $23.7 billion. We projected stockholders’ equity of $10.8 billion.
Net asset value was $19.24 per share, up from $18.40 as of Dec 31, 2022.
Our Take
Driven by a rise in the demand for customized financing, growth in total investment income is expected to continue in the quarters ahead. Increased investment commitments will likely keep supporting the company’s financials. However, its expansion strategies will likely lead to a rise in costs in the near term, which is expected to hurt the bottom line.
Ares Capital Corporation Price, Consensus and EPS Surprise
Ares Capital Corporation price-consensus-eps-surprise-chart | Ares Capital Corporation Quote
Currently, ARCC 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 Stocks
LPL Financial’s (LPLA - Free Report) fourth-quarter 2023 adjusted earnings of $3.51 per share handily surpassed the Zacks Consensus Estimate of $3.33. The bottom line reflects a year-over-year decline of 17%.
Results benefited from robust improvement in revenues, partly offset by an increase in expenses. LPLA recorded growth in brokerage and advisory assets, which acted as a tailwind.
Charles Schwab’s (SCHW - Free Report) fourth-quarter 2023 adjusted earnings of 68 cents per share beat the Zacks Consensus Estimate of 65 cents. The bottom line, however, declined 36% from the prior-year quarter.
SCHW’s results benefited from the solid performance of the asset management business. The absence of fee waivers and solid brokerage account numbers acted as tailwinds in the quarter. However, lower revenues due to higher funding costs and lower volatility posed a major headwind for SCHW.