PSEC announces earnings Monday. Please help us out and let us know what will happen Monday. No need for essay answer to this question, its multiple choice. Question: what will PSEC's earnings report be on Monday?
A. Exceed analysts expectations
B. In line with analysts expectations
C. Below analysts expectations
D. I do not know
To be fair, I'll give you my answer- I do not know. No answer defaults to D and you lose the right to say I told you so Monday night or Tuesday morning! Others are welcome to answer as well.
According to their press release on Feb. 7, 2013:
" We estimate that our net investment income for the current March 2013 quarter will be $0.27 to $0.31 per share."
So in fact they already told you in advance just to prepare you. Don't expect too much. The problem is for their last quarter (Q2):
"For the December 2012 quarter, our net investment income ("NII") was $99.2 million or $0.51 per weighted average number of shares for the quarter."
Therefore, even they may reach 0.31 NII, it would appear to be a downer comparing with last quarter.
According to E-Trade:
Q3 earnings are expected to be announced after market hours on May 6, 2013Estimates: 0.340 | 0.306 | 0.290 (High | Mean | Low)
According to Bloomberg Businessweek, with seven analysts, the earning estimate for its 2013 Q3 quarter to be announced on May 6 will be 0.30.
Therefore, I have no reason not to believe they will at least achieve the 0.30 or even 0.31 just like they had previously told their investors on Feb 7, 2013.
The problem is how the investors will take it since its earnings for its previous 4 quarters are:
2012 Q3 0.51; Q4, 0.51; 2013, Q1, 0.46, Q2, 0.51.
Therefore, even if its 2013 Q3 earning will meet its estimate at 0.30 or slightly surpass it at 0.31, with the next quarter (Q4) to be 0.31, it almost appears to be nothing to get too overly excited.
I also agree with Instant that May 6 Monday will be a BAD day for the market, especially BDCs, what went up will come down. Therefore, if PSEC drops on May 6 and rises again on May 7 because of better than expected earning, there will be a lot of money to be made. PSEC did reach it golden cross on last Friday, indicating a short upward trend. J
Enough, you idiot, PSEC has gone up 9.5% off the bottom in two weeks. All the while you have been chicken little after selling out at the bottom. Do not fight the FED. Also, Mr Market has been running PSEC up and until the uptrend fails it is up. If you were smart you would be an active investor/trader in PSEC as I and many others are. I have been playing PSEC for 18 months and as a result my current breakeven point is 8.47. You can have the same result if you had a positive attitude and a successful strategy..........get it right or just go away.
I am not so sure about their NAV though because it really depend on how much fair market value they will place on their current holdings and the way they did it was totally subjective, that means it can go either way. Normally, I believe they will try to jack up their NAV in the last quarter, Q4, to surpass that of last year's Q4. This article "Prospect Capital: Is It Better Than American Capital?" posted in Seeking Alpha on 4/4/13 may be a good read. In this article, the author said, "PSEC has a $3 billion portfolio at fair value with a less than average industry diversification mostly because of a larger concentration in consumer discretionary (see chart below). It invests in collateralized loan obligations ("CLO") which are debt and equity positions in a form of securitization where the cash flows of a portfolio of loans are pooled and passed on to different classes of owners in various tranches; generally risk rated from BB to B depending on the tranche. In a previous article, I discussed some potential issues with these types of investments including potentially riskier and less transparent than direct investments in portfolio companies, repayment priority of more senior debt holders, thinly traded, not listed on traditional exchanges, making them less liquid, difficult to value and more volatile. CLO investments account for 14% of the portfolio. Other BDCs that invest in CLO-type vehicles are KCAP Financial (KCAP) with 24% of its portfolio, TICC Capital (TICC) at 32% and ACAS at 5%."
Basically, the public have absolutely no ways in deciding the fair market values of PSEC's holdings.
I will say their NAV for Q3 and Q4, comparing with its Q2, will be stagnant, probably within 9 cents of its previous quarter.
Just for fun, I'm going to say that they (A) exceed expectations in NII and increased NAV. Origination fees have to be above estimates. Shares sold above NAV during the quarter will add to NAV. The Tower Captial investment will have a full quarter of earnings. I have a report that shows that during the first quarter high yield bonds were by far the best performers. I also think debt/equity will have crept up into the 1.45-1.5 range as the excess cash was put to use.
Overall, though earnings can't be completely blown out of the water. PSEC receives interest on loans. They have very little equity in companies. The vast majority of the portfolio is loans. How much interest above estimate could they really have earned? I do expect to see a minimum of a $.10 increase in NAV though.
Long Term PSEC has a place in a diversified portfolio. Don't put all of your eggs in one basket though. PSEC can't have near 0% defaults on 12% loans forever. There is no bad debt accrual fund as an emergency for bad times. We get paid that high dividend instead. There will be a time when their customers have difficulty rolling over their loans. That's when I expect PSEC to underperform, but by no means be anything close to bankrupt. I also expect PSEC to underperform when the markets are surging as they are now.
To further clarify earnings expectations:
High: 34 cents.
Low: 29 cents.
Consensus based on 7 analysts: About 30 and one half cents.
(I acquired this information from the Research section of the Scottrade website).
Sentiment: Strong Buy