On May 15, 2014, we issued an updated research report on
American Capital, Ltd.
). The company recently reported disappointing first-quarter 2014
results that reflected higher operating expenses and a declining
top line. However, new investments and realization from portfolios
were the positives.
Notably, in the quarter, the company made new investments worth
$321 million in operating companies and recorded $442 million of
cash proceeds from the realization of portfolio investments. We
expect the company to continue to have strong investment
opportunities this year as it is expected to utilize capital to
invest in new companies and at the same time offer additional
finance to the existing ones.
American Capital reported earnings of 2 cents per share,
significantly lagging the Zacks Consensus Estimate of 22 cents.
Also, this was below 14 cents earned in the previous quarter. Net
operating income for the quarter came in at $5 million,
substantially down from $38 million reported in the earlier
With this, the company missed the Zacks Consensus Estimate in the
last four quarters by an average of 74.25%.
Going forward, the high debt level may weigh on the company's
financials. As of Mar 31, 2014, American Capital's total debt was
Following first-quarter 2014 results, the Zacks Consensus Estimate
for 2014 decreased 7.6% to 85 cents per share while it increased
8.3% to $1.04 for 2015, over the last 30 days. American Capital
currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some better-ranked stocks worth considering include
Fifth Street Senior Floating Rate Corp.
Great Southern Bancorp Inc.
). All these carry a Zacks Rank #1 (Strong Buy).
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