Prospect Capital (PSEC) Q4 Earnings Lag on Lower Revenues

Prospect Capital Corporation’s PSEC fourth-quarter fiscal 2019 (ended Jun 30) net investment income of 19 cents per share missed the Zacks Consensus Estimate by a penny. Also, the bottom line decreased 13.6% year over year.

Results were adversely impacted by lower revenues and a slight rise in expenses. Also, decline in value of investment portfolio was an undermining factor.

Net investment income for the reported quarter came in at $69.6 million, down 12.4% from the prior-year quarter.

For fiscal 2019, net investment income was $312.9 million or 85 cents per share, up from $286.9 million or 79 cents per share in fiscal 2018.

Total Investment Income Down, Expenses Rise

Total investment income for the quarter was $164.4 million, down 5.6% year over year. The fall was mainly due to lower dividend income and interest income. Also, the figure lagged the Zacks Consensus Estimate of $166.7 million.

Total investment income for fiscal 2019 grew 7% year over year to $703.8 million. However, it missed the consensus estimate of $706.1 million.

Total operating expenses increased marginally to $94.7 million.

Total Portfolio Value & Originations

The fair value of Prospect Capital’s total investment portfolio was $5.66 billion as of Jun 30, 2019, down 1.3% year over year.

In the reported quarter, the company originated $187.9 million in new and follow-on investments.

Balance Sheet

As of Jun 30, 2019, Prospect Capital’s net asset value was $9.01 per share compared with $9.35 on Jun 30, 2018. Further, the company held $4.12 billion of unencumbered assets as on the same date.

At the end of the quarter, net of cash debt to equity ratio was 70%, up from 66.5% as of Jun 30, 2018.

Our Take

Prospect Capital’s loan origination activity continues to be on track and it strategically deploys its capital while maintaining a balanced and diversified approach across various industries and sectors. However, elevated expense levels are expected to hurt the bottom line to some extent.

Prospect Capital Corporation Price, Consensus and EPS Surprise

  Prospect Capital Corporation Price, Consensus and EPS Surprise

Prospect Capital Corporation price-consensus-eps-surprise-chart | Prospect Capital Corporation Quote

Currently, Prospect Capital 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 second-quarter 2019 core earnings of 49 cents per share surpassed the Zacks Consensus Estimate of 44 cents. Also, the bottom line grew 25.6% from the year-ago quarter.

Hercules Capital Inc.’s HTGC second-quarter 2019 net investment income of 36 cents per share outpaced the Zacks Consensus Estimate of 33 cents. The bottom line also was 38.5% above the year-ago figure.

Capitala Finance Corp.’s CPTA second-quarter 2019 net investment income per share of 25 cents was in line with the Zacks Consensus Estimate. The figure was 3.8% lower than the prior-year quarter’s number.

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