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Will Rising Costs Affect Blue Owl's (OBDC) Q1 Earnings Growth?

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Blue Owl Capital Corporation (OBDC - Free Report) is set to report its first-quarter 2024 results on May 8, after the closing bell.

What Do the Estimates Say?

The Zacks Consensus Estimate for first-quarter earnings per share of 48 cents suggests a 6.7% jump from the prior-year earnings of 45 cents. The consensus mark remained stable over the past week. The consensus estimate for first-quarter revenues of $399.2 million indicates a 5.7% 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 4.3%. This is depicted in the graph below:

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.

Q4 Earnings Rewind

In the last reported quarter, the business development company reported adjusted earnings per share of 51 cents, beating the Zacks Consensus Estimate by 6.3% due to growth in the portfolio, high interest rates and record net investment income. However, the positives were partially offset by increased costs.

Now, let’s see how things have shaped up before the first-quarter earnings announcement.

Q1 Factors to Note

In the first quarter, net investment income is expected to have received a boost from strong credit performance across the portfolio and favorable conditions in the high-interest rate environment. Our estimates indicate year-over-year growth of more than 5% in this metric for the quarter.

OBDC’s dividend income is expected to have witnessed an uptick due to recurring dividends earned from its equity investments. Our model estimate for controlled dividend income in the first quarter suggests 13% year-over-year growth, whereas the Zacks Consensus Estimate indicates a 10.2% increase.

Blue Owl Capital's investment portfolio is expected to have experienced growth in the upcoming quarter, driven by robust demand for effective financing solutions. Our projections suggest significant increases in both non-controlled and controlled interest income compared to the same quarter last year, with estimates indicating more than a 5% rise for non-controlled interest income and an impressive 137% surge for controlled interest income.

The factors outlined are anticipated to have positioned the company for year-over-year growth. However, repayments are expected to have remained relatively subdued in the quarter under review, primarily due to high interest rates. Also, both the Zacks Consensus Estimate and our estimate for payment-in-kind interest income from non-controlled, non-affiliated investments suggest a 5.5% year-over-year decline.

Additionally, the company is likely to have experienced elevated operating expenses due to higher interest expenses, professional, management and performance-based incentive fees. These, in turn, are anticipated to have trimmed its margins a bit in the to-be-reported quarter, making an earnings beat uncertain.

Our model predicts the operating expenses to have witnessed a nearly 5% increase from the year-ago quarter's reported figure. We expect interest expenses to have risen more than 6% 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 March quarter: American Express Company (AXP - Free Report) , Euronet Worldwide, Inc. (EEFT - Free Report) and Virtu Financial, Inc. (VIRT - Free Report) .

American Express reported first-quarter 2024 earnings per share of $3.33, which beat the Zacks Consensus Estimate by 12.1% thanks to improved net interest income and growth in the customer base of Millennials and Gen-Z, driving growth in the U.S. Consumer Services Billed business. The results were partially offset by escalating customer engagement and compensation expenses.

Euronet reported first-quarter adjusted earnings of $1.28 per share, which surpassed the Zacks Consensus Estimate by 28% due to strong contributions from the EFT Processing, epay and Money Transfer segments. Solid growth in cross-border transactions and sustained demand for digital products aided performance. However, the upside was partly offset by a higher level of operating costs.

Virtu Financial reported first-quarter 2024 adjusted earnings per share of 76 cents, which outpaced the Zacks Consensus Estimate by 28.8% on the back of substantial growth in interest and dividends income coupled with strong revenue contribution from the Market Making segment. However, the upside was partly offset by a decline in net trading income and an elevated overall expense level.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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