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Prospect Capital’s 1Q17 Results Fall on Lower Deployments

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Dec. 4 2020, Updated 10:53 a.m. ET

Net asset value rise

Prospect Capital (PSEC) reported fiscal 1Q17 (September quarter) EPS (earnings per share) of $0.22—lower than the analyst estimates of $0.24. The company saw lower earnings on lower investment income and other income following the sale of Harbortouch in the previous quarter. Harbortouch contributed $5.1 million in interest income. For fiscal 2017, Prospect is expected to post EPS of $0.98.

Prospect’s NAV (net asset value) fell marginally from $9.62 per share on June 30, 2016, to $9.60 per share on September 30, 2016. This was mainly due to a marginal rise in accumulated realized losses.

Prospect Capital’s net investment income fell to $78.9 million in fiscal 1Q17, as compared to $91.2 million one year previously. Compared to the June quarter, its net investment income fell $12 million, including the effect of Harbortouch’s exit, which resulted in lower interest income of $5 million. The company reported total investment income of $180 million in fiscal 1Q17, as compared to $200 million in fiscal 1Q16.

Here’s how some of the company’s peers in investment management fared in their latest quarterly earnings:

  • Apollo Investment (AINV) beat estimates.
  • Ares Capital (ARCC) beat estimates.
  • BlackRock Capital Investment (BKCC) missed estimates.
  • Blackstone (BX) beat estimates.

Together, these companies make up 1.3% of the Financial Select Sector SPDR ETF (XLF).

Middle-market lender

Prospect is a financial services company that lends and invests in middle-market and privately held companies. The company operates as a closed-end fund and is functioning as a business development company. It provides funds to companies in the form of senior and subordinated debt and equity. These companies then deploy capital for growth, development, acquisitions, divestitures, and recapitalizations.

In this series, we’ll study Prospect Capital’s portfolio strategy, yields, deployments, balance sheet strength, dividends, and valuations.

Let’s begin with Prospect Capital’s yields in fiscal 2017.

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