On Feb 19, 2014, we issued an updated research report on
American Capital, Ltd.
). The company recently reported dismal fourth-quarter 2013
results that reflected higher operating expenses and a declining
top line. We believe a low interest-rate environment and
regulatory issues may continue to pressure top-line growth in the
American Capital reported earnings of 14 cents per share, lagging
the Zacks Consensus Estimate of 11 cents. Also, this was below 26
cents earned in the prior-year quarter. Net operating income for
the quarter came in at $38 million, significantly down from $83
million reported in the prior-year quarter.
With this, the company missed the Zacks Consensus Estimate in all
four quarters of 2013 by an average of 64.0%.
Total operating revenue stood at $118 million for the quarter,
down 34% from the prior-year quarter. This was primarily due to
lower interest and dividend income.
Though American Capital is focused on expense management, the
quarter in review witnessed a 2% year-over-year increase in its
operating expenses. This was primarily driven by elevated
salaries, benefits and stock-based compensation.
Going forward, the high debt level may weigh on the company's
financials. As of Dec 31, 2013, American Capital's total debt
stood at $791 million.
Weak fundamentals and dismal results at American Capital
triggered a downward revision in the Zacks Consensus Estimate, as
analysts turned more bearish on the stock's future performance.
This is evident from the movement witnessed in the Zacks
Consensus Estimate over the past 30 days. For 2014, it decreased
7.3% to $1.02 per share while it declined 28.4% to $1.01 for
American Capital currently carries a Zacks Rank #5 (Strong Sell).
Key Picks from the Sector
Some better-ranked stocks worth considering include
Apollo Investment Corp.
Gladstone Investment Corp.
Horizon Technology Finance Corp.
). All these carry a Zacks Rank #2 (Buy).
AMER CAP LTD (ACAS): Free Stock Analysis
APOLLO INV CP (AINV): Free Stock Analysis
GLADSTONE INVES (GAIN): Free Stock Analysis
HORIZON TECHNOL (HRZN): Free Stock Analysis
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