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What Will Drive Closed-End Funds' 2017 Performances?

PART:
1 2 3 4 5 6 7 8 9 10
Part 9
What Will Drive Closed-End Funds' 2017 Performances? PART 9 OF 10

What to Expect from Prospect’s, Ares’s, BlackRock’s 4Q16 Earnings

Earnings expectations

BlackRock Capital Investment (BKCC) is expected to report EPS (earnings per share) of $0.23 in 4Q16, compared to earlier estimates of $0.25, reflecting subdued activity in its most recent quarter.

The company is expected to see revenue of $26 million, representing a 16.2% fall YoY (year-over-year). In 3Q16, the company saw net exits amid increased volatility. However, it’s well positioned to take advantage of good investment opportunities.

What to Expect from Prospect&#8217;s, Ares&#8217;s, BlackRock&#8217;s 4Q16 Earnings

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In comparison, Ares Capital (ARCC) is expected to report EPS of $0.39 in 4Q16 and EPS of $1.57 in 2016, reflecting implied growth of 2% compared to 2015. The company is expected to improve its yields and originations by targeting the second-lien debts of companies with strong earnings profiles. The company recently entered into an agreement to acquire American Capital (ACAS).

Closed-end funds (PEX) will be tested amid a volatile environment and fluctuating interest rates. Companies with higher leverages and risky investments will see discounted valuations.

Prospect and Apollo

Prospect Capital (PSEC) is expected to post EPS of $0.23 in 4Q16 and $0.93 in 2016, lower than its trailing-four-quarter dividend per share of $1. The company’s performance has been mixed over the past few quarters. It needs to augment its originations in order to enhance its interest income and target more structured and online lending for margin improvement.

Apollo Investment (AINV) is expected to post EPS of $0.16 in 4Q16 and $0.66 in 2016, compared to $0.83 in 2015, reflecting steep fall due to sour investments and holdings losses. The company is in restructuring mode in order to invest in quality assets and generate a stable income for its shareholders.

In the final part of this series, we’ll look at additional strategies that these closed-end funds plan to employ in 2017.

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