Main Street Capital Upped to Strong Buy


On Mar 4, Zacks Investment Research upgraded Main Street Capital Corporation (MAIN) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Main Street Capital, which is in the diversified investments space, has witnessed positive estimate revisions on the back of strong fourth-quarter 2013 results. Further, the company has delivered positive earnings surprises in 3 of the 4 quarters of 2013.

On Feb 27, Main Street Capital reported its fourth-quarter and full year 2013 results.  Net investment income per share in the reported quarter came in at 57 cents, beating the Zacks Consensus Estimate by 5.6%. Results benefited from top-line growth and strong portfolio investment activities.

Total investment income increased 27.6% year over year to $33.4 million. This was primarily driven by higher interest, fee and dividend income from control investments.
However, total expenses rose 31.4% to $10.6 million.

As of Dec 31, 2013, total portfolio investments stood at around $1.3 billion, reflecting a year-over-year rise of 39.1%. Further, net asset value per share was up 7.0% year over year to $19.89.

During the quarter, Main Street Capital continued with its strategic portfolio investment activities. The company exited from investments made in the Van Gilder Insurance Corporation, garnering 1.4 times the amount of debt and equity invested in the company. Further, Main Street Capital strengthened its lower middle market portfolio with $60.6 million investments.

Main Street Capital’s interest expense is expected to gradually decrease in the upcoming quarters as the company restructured its credit facility during 2013. With the amendment, the limit increased to $445.0 million from $287.5 million at Dec 31, 2012 and lowered interest rate to LIBOR plus 2.25%. Further, with the extension of the term to 5 years, the revolving credit facility is now set to mature on Sep 2018 from the earlier stated maturity in Sep 2017.

Additionally, the Zacks Consensus Estimate for 2014 increased 0.4% to $2.33 per share.  

Other Stocks to Consider

Other stocks in this space worth considering include Apollo Investment Corporation (AINV), Horizon Technology Finance Corporation (HRZN) and Gladstone Investment Corporation (GAIN). All these stocks hold a Rank #2 (Buy).


Read the Full Research Report on AINV
Read the Full Research Report on HRZN
Read the Full Research Report on GAIN
Read the Full Research Report on MAIN

Zacks Investment Research

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