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Capitala Finance (CPTA) Q4 Earnings & Revenues Lag Estimates

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Capitala Finance Corp.’s (CPTA - Free Report) fourth-quarter 2019 net investment income per share of 12 cents missed the Zacks Consensus Estimate of 22 cents. The bottom line was 45.5% lower than the prior-year quarter’s number.

Results were hurt by lower total investment income. However, a decline in expenses provided some support. The company’s portfolio activity remained strong.

In2019, net investment income was 81 cents per share, which lagged the consensus estimate of 90 cents and was down 19% year over year.

Total Investment Income & Expenses Decline

Total investment income inthe quarter was $9.6 million, down 15% year over year. This decline was primarily due to a fall in interest and fee income and total payment-in-kind interest income. Also, the figure missed the Zacks Consensus Estimate of $10.8 million.

In 2019, total investment income declined 6.9% to $44 million. It also missed the consensus estimate of $45.2 million.

Total expenses decreased nearly 1% year over year to $7.7 million. This decline was due to a fall in base management fees.

Balance Sheet Position

As of Dec 31, 2019, cash and cash equivalents totaled $62.3 million, up from $39.3 million as of Dec 31, 2018.  Total assets amounted to $427.3 million, down from $493.2 million as of Dec 31, 2018.

Further, net asset value was $9.14 per share, down from $11.88 at the end of December.

Portfolio Activities

During the fourth quarter, the company originated $29 million of new investments. Of this, $27.4 million were debt investments and the remaining was in equity securities.

Our Take

Driven by the rise in demand for financing, Capitala Finance’s investment income is expected to grow in the near term. Moreover, lower expenses are likely to aid profitability.

Capitala Finance Corp. Price, Consensus and EPS Surprise

Capitala Finance Corp. Price, Consensus and EPS Surprise

Capitala Finance Corp. price-consensus-eps-surprise-chart | Capitala Finance Corp. Quote

Currently, Capitala Finance carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Finance Stocks

Ares Capital Corporation’s ARCC fourth-quarter 2019 core earnings of 45 cents per share met the Zacks Consensus Estimate and were in line with the year-ago quarter’s figure.

Hercules Capital Inc.’s HTGC fourth-quarter 2019 net investment income of 38 cents per share outpaced the Zacks Consensus Estimate of 36 cents. The bottom line grew 18.8% from the year-ago quarter’s reported figure.

LendingClub Corporation’s LC fourth-quarter 2019 adjusted earnings of 8 cents per share surpassed the Zacks Consensus Estimate of 5 cents. Also, the bottom line reflects improvement from loss of 5 cents in the prior-year quarter.

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