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What's in the Cards for Ares Capital (ARCC) in Q2 Earnings?

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Ares Capital Corporation (ARCC - Free Report) is scheduled to announce second-quarter 2019 results on Jul 30, before the market opens. Its revenues and earnings are projected to grow year over year.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate. Results benefited from an increase in total investment income and healthy portfolio activity. Moreover, stable expenses were a positive for the company.

It has an impressive earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in three and met in one of the trailing four quarters, the average beat being 8.5%.

Ares Capital Corporation Price and EPS Surprise
 

Ares Capital Corporation Price and EPS Surprise

Ares Capital Corporation price-eps-surprise | Ares Capital Corporation Quote

However, activities of the company in the second quarter failed to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of 44 cents for the to-be-reported quarter remained unchanged over the past 30 days. Nonetheless, the figure indicates 12.8% rise from the year-ago quarter’s reported number.

The consensus estimate for sales of $362.5 million suggests 8.9% growth on a year-over-year basis.

Before we take a look at what our quantitative model predicts for the to-be-reported quarter, let’s check the factors that are likely to impact the results.

Factors to Impact Q2 Results

The Zacks Consensus Estimate for interest income from investments (constituting more than 75% of the company’s total investment income) shows that this component will likely increase in the second quarter. The consensus estimate for the same is pegged at $295 million, indicating 2.1% growth from the prior quarter’s reported figure.

The consensus estimate for capital structuring service fees is pegged at $30.53 million, suggesting a 32.2% decline sequentially. Moreover, the Zacks Consensus Estimate for dividend income of $26.96 million shows that this component is also likely to decline 13% on a sequential basis.

Nevertheless, the consensus estimate for other income is pegged at $9.41 million, indicating 17.6% rise from the prior quarter’s reported figure.

Ares Capital has been witnessing higher expenses over the past several quarters. As it continues to invest in venture growth stage companies, operating expenses are likely to remain elevated.

Earnings Whispers

According to our quantitative model, it cannot be conclusively predicted whether Ares Capital will be able to beat the Zacks Consensus Estimate this time. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Ares Capital has an Earnings ESP of 0.00%.

Zacks Rank: The company currently carries a Zacks Rank #2 (Buy). While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings beat.

Stocks That Warrant a Look

Here are some finance stocks that you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.

Franklin Resources, Inc. (BEN - Free Report) is slated to release results on Jul 30. It has an Earnings ESP of +0.13% and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Moody's Corporation (MCO - Free Report) is scheduled to release results on Jul 31. It presently has an Earnings ESP of +0.65% and a Zacks Rank #2.

Banco Macro S.A. (BMA - Free Report) is expected to release results on Aug 28. It has an Earnings ESP of +11.83% and a Zacks Rank #3.

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