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Ares Capital Misses Estimates, Consolidates Yields in 2Q15

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Ares Capital Misses Estimates, Consolidates Yields in 2Q15 PART 1 OF 7

Ares Capital Expands Net Asset Value but Misses Estimates

Ares Capital misses estimates

Ares Capital reported its 2Q15 earnings on August 4. The company missed Wall Street analysts’ EPS (earnings per share) estimates of $0.38, instead posting $0.37.

Ares Capital’s (ARCC) net asset value stood at $5.3 billion—or $16.80 per share—as of June 30, 2015. It’s up by 1.7% compared to last year, mainly due to good underlying portfolio performance. The company’s net funding for the second quarter stood at $71 million because of its focus on selling lower yielding assets.

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In an August 4 company press release, Ares Capital CEO, Kipp deVeer, noted, “We continued to experience competitive advantages from our size and scale in the second quarter in a year when middle market loans have been light, making almost 60% of our investment commitments to existing portfolio companies. We continue to focus on senior secured investments with 65% of our new commitments in first or second lien senior secured loans.”

Specialty finance company

Ares Capital is a specialty finance company. It operates closed-end, non-diversified investment management businesses. The company acts as a closed-end fund. It’s regulated as a business development company. Its objective is to generate both current income and capital appreciation through debt and equity investments. It invests primarily in US middle-market companies.

The company concentrates primarily on the following areas:

  • corporate, non-syndicated senior debt, mezzanine debt, and non-control equity to middle-market companies
  • project finance – high yield senior debt and mezzanine debt to finance power generation projects
  • venture finance – senior secured loans to early-stage and emerging growth companies backed by venture capital firms

Ares Capital invests in sectors including education, energy, restaurants, healthcare services, business services, food services, and financial services, among others.

Other investment management players

Here’s how some of Ares Capital’s peers in investment management fared with their respective quarterly earnings:

  • Prospect Capital (PSEC) – yet to report its earnings
  • BlackRock Capital Investment (BKCC) – beat estimates by 5%
  • Blackstone (BX) – missed estimates
  • KKR (KKR) – beat estimates by 2%

Asset management firms form 15% of the Financial Select Sector SPDR Fund (XLF).

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