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Prospect Capital Reports Strong 4Q15 Operating Performance

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Prospect Capital Reports Strong 4Q15 Operating Performance PART 1 OF 7

Prospect Capital Stock Rises on Strong June Quarter Earnings

Beats the NI estimate

Prospect Capital (PSEC) reported its June quarter (or 4Q15) earnings on August 26, 2015. The company beat Wall Street analysts’ net income (or NI) estimates of $0.25 with a posted NI of $0.26. Prospect Capital’s stock has appreciated by approximately 5% since the announcement of its earnings. The company’s market capitalization stands at $2.74 billion, and its net asset value rose marginally to from $10.30 per share on March 31, 2015, to $10.31 per share on August 26, 2015.

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Prospect Capital’s net profits increased by 24% to $94.8 million in 4Q15 as compared to 4Q14. The rise in net profits is attributable mainly to changes the company has made to its portfolio.

Financial services

Prospect Capital is a financial services company that lends to and invests in middle-market, privately held companies. The company acts as a close-ended fund and is regulated as a business development company. It provides capital to companies in the form of senior and subordinated debt and equity. This capital is then used for acquisitions, divestitures, growth, development, and recapitalizations.

Prospect Capital works with financial sponsors and management teams to identify investments with historical cash flows, asset collateral, or contracted pro forma cash flows. Prospect Capital investments are made based on one of nine origination strategies:

  1. lending in private equity-sponsored transactions
  2. lending directly to companies not owned by private equity firms
  3. control investments in corporate operating companies
  4. control investments in financial companies
  5. investments in structured credit
  6. real estate investments
  7. investments in syndicated debt
  8. aircraft leasing
  9. online lending

Other investment management players

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

  • Ares Capital Corporation (ARCC) missed estimates by 3%
  • BlackRock (BKCC) beat estimates by 5%
  • Blackstone (BX) missed estimates
  • KKR & Co. (KKR) beat estimates by 2%

Together, these companies form 5.87% of the PowerShares Global Listed Private Equity Portfolio (PSP).

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