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Newtek (NEWT) Q3 Earnings Beat on Higher Investment Income

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Newtek Business Services Corp.’s NEWT third-quarter 2019 adjusted net investment income of 63 cents per share outpaced the Zacks Consensus Estimate of 57 cents. The bottom-line figure also jumped 26% year on year.

Results benefited from higher total investment income and improved investment portfolio. However, rise in total expenses acted as a headwind.

Including certain one-time items, net investment loss was $0.53 million or 3 cents per share, improving from a loss of $1.4 million or 8 cents per share reported in the prior-year quarter.

Total Investment Income Improves, Expenses Rise

Total investment income was $16 million, up 29.4% from the year-ago quarter. This upside was mainly driven by a higher interest, dividend and servicing income. In addition, the top line beat the Zacks Consensus Estimate of $13.7 million.

Total expenses flared up 20.3% year over year to $16.6 million. The increase mainly resulted from higher interest expenses, professional fees, other general and administrative costs, along with origination and servicing-related party costs.

Lending Activities

In the third quarter, Newtek Small Business Finance, LLC (NSBF) funded SBA 7(a) loans worth $114.3 million, down 6.6% year over year.

Full-year 2019 SBA 7(a) loan funding is expected to be $520 million, up 10.8% year over year.

Balance Sheet Position

As of Sep 30, 2019, Newtek’s net asset value was $15.41 per share compared with $15.91 as on Dec 31, 2018.

The company’s total investment portfolio went up 12.9% to $610.9 million as of Sep 30, 2019, from $541.1 million as of Dec 31, 2018.

At the end of the third quarter, debt-to-equity ratio was 133%.

Our Take

Newtek’s investment portfolio continues to be on track. However, elevated expense levels might hurt the bottom line to some extent.

Currently, Newtek carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance & Earnings Release Dates of Other Finance Stocks

Ares Capital Corporation’s ARCC third-quarter 2019 core earnings of 48 cents per share surpassed the Zacks Consensus Estimate of 46 cents. Also, the bottom line rose 6.7% from the year-ago quarter.

Hercules Capital Inc.’s HTGC third-quarter 2019 net investment income of 37 cents per share outpaced the Zacks Consensus Estimate of 34 cents. The bottom line grew 19.4% from the year-ago figure.

OFS Capital Corporation (OFS - Free Report) is scheduled to announce results on Nov 8.

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