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Will Higher Costs Dampen Blue Owl's (OBDC) Q4 Earnings?
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Blue Owl Capital Corporation (OBDC - Free Report) is set to report its fourth-quarter 2023 results on Feb 21, after the closing bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for fourth-quarter earnings per share of 48 cents suggests a 17.1% jump from the prior-year earnings of 41 cents. The consensus mark remained stable over the past week. The consensus estimate for fourth-quarter revenues of $397.4 million indicates a 13.4% increase from the year-ago reported figure.
Blue Owl Capital beat the consensus estimate for earnings in all the prior four quarters, with the average surprise being 3.4%. This is depicted in the graph below:
Blue Owl Capital Corporation Price and EPS Surprise
Before we get into what to expect in the to-be-reported quarter in detail, let’s see how the company performed in the last quarter.
Q3 Earnings Rewind
In the last reported quarter, the business development company reported adjusted earnings per share of 49 cents, beating the Zacks Consensus Estimate by 4.3% due to growth in the portfolio, high interest rates and solid net investment income. However, the positives were partially offset by higher costs.
For the fourth quarter, the net investment income is likely to have benefited on the back of solid credit performance across the portfolio, a high interest rate environment and improved dividend income. Our estimate suggests more than 16% year-over-year growth in the metric this time.
OBDC’s dividend income is expected to have witnessed an uptick due to recurring dividends earned from its equity investments. Also, nonrecurring dividends stemming from efficient portfolio companies are likely to have aided the metric. Our model estimates for non-controlled and controlled dividend income in the fourth quarter suggest 5.3% and 21.6% year-over-year growth, respectively.
The investment portfolio of Blue Owl Capital is likely to have expanded in the to-be-reported quarter due to solid demand for effective financing solutions. Our estimates for non-controlled and controlled interest income indicate more than 10% and 121% increases from the prior-year quarter, respectively. Furthermore, we expect payment-in-kind interest income to have jumped more than 19% in the fourth quarter.
The factors stated above are expected to have positioned the company for year-over-year growth. However, repayments are expected to have remained comparatively soft in the quarter under review, with interest rates remaining high. Also, the company is likely to have witnessed elevated operating expenses.
The increase in costs is likely to have been due to higher interest expenses and professional, management and performance-based incentive fees. This, in turn, is anticipated to have put a strain on its margins in the to-be-reported quarter, making an earnings beat uncertain. Our model predicts the operating expenses to have witnessed a nearly 8% increase from the year-ago quarter's reported figure. We expect interest expenses to have risen more than 9% year over year.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Blue Owl Capital this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate currently stands at an earnings of 48 cents per share, in line with the Zacks Consensus Estimate.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Blue Owl Capital currently carries a Zacks Rank #2.
Here are some companies from the broader Finance space that have reported earnings for the December quarter: PRA Group, Inc. (PRAA - Free Report) , Virtu Financial, Inc. (VIRT - Free Report) and Rithm Capital Corp. (RITM - Free Report) .
PRA Group incurred a fourth-quarter 2023 loss of 22 cents per share, narrower than the Zacks Consensus Estimate of a loss of 35 cents per share, thanks to robust portfolio income, growing cash collection, improving pricing and better operational results in Brazil and Europe. However, the upside was partially offset by increased expenses and weakness in PRAA’s U.S. business.
Virtu Financial reported fourth-quarter 2023 adjusted earnings per share of 27 cents, which missed the Zacks Consensus Estimate by 35.7%, due to deterioration in net trading income and commissions, net and technology service revenues and higher expenses. However, VIRT’s results were somewhat supported by improved interest and dividend income.
Rithm Capital reported fourth-quarter 2023 adjusted earnings of 51 cents per share, which outpaced the Zacks Consensus Estimate by a whopping 45.7%, thanks to improved asset management revenues and continuous acquisition of customer loans. RITM’s results were partially offset by an elevated expense level, lower net servicing revenues and interest income.
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Will Higher Costs Dampen Blue Owl's (OBDC) Q4 Earnings?
Blue Owl Capital Corporation (OBDC - Free Report) is set to report its fourth-quarter 2023 results on Feb 21, after the closing bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for fourth-quarter earnings per share of 48 cents suggests a 17.1% jump from the prior-year earnings of 41 cents. The consensus mark remained stable over the past week. The consensus estimate for fourth-quarter revenues of $397.4 million indicates a 13.4% increase from the year-ago reported figure.
Blue Owl Capital beat the consensus estimate for earnings in all the prior four quarters, with the average surprise being 3.4%. This is depicted in the graph below:
Blue Owl Capital Corporation Price and EPS Surprise
Blue Owl Capital Corporation price-eps-surprise | Blue Owl Capital Corporation Quote
Before we get into what to expect in the to-be-reported quarter in detail, let’s see how the company performed in the last quarter.
Q3 Earnings Rewind
In the last reported quarter, the business development company reported adjusted earnings per share of 49 cents, beating the Zacks Consensus Estimate by 4.3% due to growth in the portfolio, high interest rates and solid net investment income. However, the positives were partially offset by higher costs.
Now, let’s see how things have shaped up before the fourth-quarter earnings announcement.
Q4 Factors to Note
For the fourth quarter, the net investment income is likely to have benefited on the back of solid credit performance across the portfolio, a high interest rate environment and improved dividend income. Our estimate suggests more than 16% year-over-year growth in the metric this time.
OBDC’s dividend income is expected to have witnessed an uptick due to recurring dividends earned from its equity investments. Also, nonrecurring dividends stemming from efficient portfolio companies are likely to have aided the metric. Our model estimates for non-controlled and controlled dividend income in the fourth quarter suggest 5.3% and 21.6% year-over-year growth, respectively.
The investment portfolio of Blue Owl Capital is likely to have expanded in the to-be-reported quarter due to solid demand for effective financing solutions. Our estimates for non-controlled and controlled interest income indicate more than 10% and 121% increases from the prior-year quarter, respectively. Furthermore, we expect payment-in-kind interest income to have jumped more than 19% in the fourth quarter.
The factors stated above are expected to have positioned the company for year-over-year growth. However, repayments are expected to have remained comparatively soft in the quarter under review, with interest rates remaining high. Also, the company is likely to have witnessed elevated operating expenses.
The increase in costs is likely to have been due to higher interest expenses and professional, management and performance-based incentive fees. This, in turn, is anticipated to have put a strain on its margins in the to-be-reported quarter, making an earnings beat uncertain. Our model predicts the operating expenses to have witnessed a nearly 8% increase from the year-ago quarter's reported figure. We expect interest expenses to have risen more than 9% year over year.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Blue Owl Capital this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate currently stands at an earnings of 48 cents per share, in line with the Zacks Consensus Estimate.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Blue Owl Capital currently carries a Zacks Rank #2.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Other Finance Sector Releases
Here are some companies from the broader Finance space that have reported earnings for the December quarter: PRA Group, Inc. (PRAA - Free Report) , Virtu Financial, Inc. (VIRT - Free Report) and Rithm Capital Corp. (RITM - Free Report) .
PRA Group incurred a fourth-quarter 2023 loss of 22 cents per share, narrower than the Zacks Consensus Estimate of a loss of 35 cents per share, thanks to robust portfolio income, growing cash collection, improving pricing and better operational results in Brazil and Europe. However, the upside was partially offset by increased expenses and weakness in PRAA’s U.S. business.
Virtu Financial reported fourth-quarter 2023 adjusted earnings per share of 27 cents, which missed the Zacks Consensus Estimate by 35.7%, due to deterioration in net trading income and commissions, net and technology service revenues and higher expenses. However, VIRT’s results were somewhat supported by improved interest and dividend income.
Rithm Capital reported fourth-quarter 2023 adjusted earnings of 51 cents per share, which outpaced the Zacks Consensus Estimate by a whopping 45.7%, thanks to improved asset management revenues and continuous acquisition of customer loans. RITM’s results were partially offset by an elevated expense level, lower net servicing revenues and interest income.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.