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Ares Capital (ARCC) Q4 Earnings Top on Lower Expenses

Ares Capital Corporation 's ARCC fourth-quarter 20Array5 core earnings of 40 cents per share outpaced the Zacks Consensus Estimate by a penny. However, earnings fell 5% year over year.

Ares Capital Corporation (ARCC) EPS BNRI & Surprise Percent - Last 5 Quarters | FindTheCompany

For 20Array5, core earnings were $Array.54 per share, which surpassed the Zacks Consensus Estimate by a penny. However, the figure declined from $Array.55 recorded in 20Array4.

Better-than-expected results reflected a rise in net investment income as well as lower operating expenses. However, weakness in new commitments acted as a headwind.

GAAP net income summed $Array4.7 million or 5 cents per share, down from $Array53.4 million or 49 cents in the prior-year quarter. Moreover, for 20Array5, GAAP net income came in at $378.7 million or $Array.20 per share, down from $59Array.0 million or $Array.94 per share in 20Array4.

Performance Details

Ares Capital's total investment income amounted to $26Array.7 million, down 3% year over year. The fall was driven by lower capital structuring service fees, management and other fees as well as other income, which was partially mitigated by higher interest income from investments and dividend income. However, the figure surpassed the Zacks Consensus Estimate of $256.3 million.

For 20Array5, total investment income was $Array.03 billion, up 4% year over year. Moreover, the figure outpaced the Zacks Consensus Estimate of $Array.0Array billion.

Total operating expenses fell 26% year over year to $Array03.8 million. The decline was attributable to a reduction in all expense components.

Net investment income climbed Array5% year over year to $Array47.Array million.

As of Dec 3Array, 20Array5, the company's cash and cash equivalents totaled $257.Array million, up from $Array94.6 million as of Dec 3Array, 20Array4. Total outstanding debt was $4.Array billion, up from $3.9 billion as of Dec 3Array, 20Array4. Further, the company has $Array.4 billion available for additional borrowing as per its present credit facility.

As of Dec 3Array, 20Array5, Ares Capital's total assets amounted to $9.5 billion, marginally up from the Dec 3Array, 20Array4 level. However, stockholders' equity declined 2% year over year to $5.2 billion as of Dec 3Array, 20Array5.

Further, net asset value was $Array6.46 per share, down from $Array6.82 per share as of Dec 3Array, 20Array4.

Notably, loans on non-accrual status represented 2.6% of total investment at an amortized cost for the reported quarter.

Portfolio Activities

New commitments worth $972.2 million were made during the reported quarter, down from $Array,389.5 million recorded in the prior-year quarter. Ares Capital exited $569.Array million of commitments in the quarter compared with $Array,269.Array million in the year-ago quarter.

Further, between Jan Array and Feb Array8, additional new investment commitments of $338 million were realized, while commitments worth $339 million were exited by the company.

Capital Deployment Activities

During the fourth quarter, Ares Capital repurchased Array2Array,62Array shares for $Array.7 million. Also, the company announced a first-quarter dividend of 38 cents per share, which will be paid on Mar 3Array to stockholders of record as of Mar Array5.

Our Take

While strong net investment inflows, solid core results and a relatively small decline in NAV per share relative to peers remain the positives for Ares Capital, the company is expected to continue to enhance its portfolio backed by a solid liquidity position. However, intensifying competition may exert pressure on the company's fundamentals.

Currently, Ares Capital carries a Zacks Rank #3 (Hold).

Among other companies in the same space, FS Investment Corporation FSIC , Garrison Capital Inc. GARS and Fifth Street Asset Management Inc. FSAM will report December-end quarter results on Feb 29, Mar 2 and Mar Array7, respectively.

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ARES CAP CP (ARCC): Free Stock Analysis Report

GARRISON CAPITL (GARS): Free Stock Analysis Report

FS INVESTMENT (FSIC): Free Stock Analysis Report

FIFTH STREET AM (FSAM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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