Ares Capital Corporation
) dipped 1.4% following its second quarter 2014 earnings release
before the opening bell on Tuesday. Core earnings came in at 34
cents per share, down 10.5% from the year-ago quarter. Moreover,
the figure missed the Zacks Consensus Estimate of 37 cents.
Results were hampered by a fall in net investment income driven by
mounting expenses. However, rise in new investment commitments and
a steady balance sheet position were the positives in the quarter.
GAAP net income totaled $142.8 million, up 7% from the prior-year
Ares Capital Corporation - Earnings Surprise |
Ares Capital's total investment income summed $224.9 million, up
9.1% year over year. The rise was driven by an increase in all the
components excluding capital structuring service fees. However, the
figure lagged the Zacks Consensus Estimate of $236.0 million.
Total operating expenses rose 19.7% year over year to $130.0
million. This was due to a rise in all the elements of expenses.
Net investment income declined 1.7% year over year to $92.0
As of Jun 30, 2014, cash and cash equivalents came in at $223.2
million. Total debt outstanding was $3.4 billion. Further, the
company has $1.8 billion available for additional borrowing as per
its present credit facility.
In July, Ares Capital completed a public equity offering. Net
proceeds of around $257.7 million from the same were used to
reimburse certain debts accumulated under its debt services and for
general business purposes.
Notably, loans on non-accrual status represented 1.9% of total
investments at amortized cost for the quarter.
While there were new investment commitments worth $1,018.9 million,
Ares Capital exited $767.3 million worth of commitments in the
reported quarter. Further, from Jul 1 to Jul 31, additional new
investment commitments of $492.0 million were made. However, it
exited commitments worth $102.0 million during the same time frame.
As of Jun 30, 2014, Ares Capital's total assets amounted to $8.6
billion compared with $7.1 billion as of Jun 30, 2013.
Stockholders' equity totaled $4.9 billion and net asset value came
in at $16.52 per share as of Jun 30, 2014, up 13.5% and 1.9%
respectively from the year-ago quarter.
Though Ares Capital's second-quarter earnings were disappointing, a
stable rise in investment commitments is expected to enhance top
line growth in the impending quarters. Moreover, the company may
continue to enhance its portfolio given its solid liquidity
However, the company's failure to control expenses is a matter of
concern. Also, intensifying competition and the prevailing
uncertain economic scenario may keep the company's fundamentals
Currently, Ares Capital carries a Zacks Rank #3 (Hold). Some
better-ranked financial organizations include Fifth Street Senior
Floating Rate Corp. (
), New Mountain Finance Corporation (
) and Hercules Technology Growth Capital, Inc. (
). All three stocks hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
ARES CAP CP (ARCC): Free Stock Analysis Report
HERCULES TECH (HTGC): Free Stock Analysis
NEW MOUNTN FIN (NMFC): Free Stock Analysis
FIFTH ST SNR FR (FSFR): Free Stock Analysis
To read this article on Zacks.com click here.