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FS KKR Capital (FSK) Q2 Earnings Beat Despite Higher Expenses

FS KKR Capital Corp.’s FSK second-quarter 2023 adjusted net investment income (NII) per share of 78 cents surpassed the Zacks Consensus Estimate of 76 cents. This compared favorably with the prior-year quarter’s 67 cents.

A solid rise in total investment income aided results. Also, portfolio activity was decent in the quarter. However, higher expenses hurt FSK’s results to some extent.

NII (GAAP basis) was $229 million, up 12.8% from the prior-year quarter’s levels.

Total Investment Income & Expenses Jump

Total investment income was $462 million, up 21.9% from the year-ago quarter’s figure. The top line outpaced the Zacks Consensus Estimate of $450 million.

Total operating expenses increased 22% to $233 million. The upside was mainly due to higher interest expenses. Moreover, the company recorded a subordinated income incentive fee of $47 million in the reported quarter.

Total Portfolio Value & Balance Sheet Decent

The fair value of FS KKR Capital’s total investment portfolio was $14.8 billion as of Jun 30, 2023.

As of Jun 30, 2023, the company’s net asset value was $24.69 per share compared with $26.41 on Jun 30, 2021.
The company had $15.9 billion in total assets and $6.9 billion in total stockholders’ equity at the end of the second quarter. As of Jun 30, 2023, 58% of FSK’s $8.2 billion of total debt was unsecured and 42% was secured.

Our Take

Decent origination volumes are expected to support FS KKR Capital’s profitability. However, a tough operating backdrop remains a headwind.

FS KKR Capital Corp. Price, Consensus and EPS Surprise


FS KKR Capital Corp. Price, Consensus and EPS Surprise
FS KKR Capital Corp. Price, Consensus and EPS Surprise

FS KKR Capital Corp. price-consensus-eps-surprise-chart | FS KKR Capital Corp. Quote


Currently, FSK carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Finance Companies

Hercules Capital Inc.’s HTGC second-quarter 2023 NII of 53 cents per share outpaced the Zacks Consensus Estimate of 50 cents. The bottom line reflects a rise of 66% from the year-ago quarter.

Results were primarily aided by an increase in the total investment income. Also, the balance sheet position remained strong, and new commitments were robust. However, higher expenses hurt HTGC’s results to some extent.

Ares Capital Corporation’s ARCC second-quarter 2023 core earnings of 58 cents per share surpassed the Zacks Consensus Estimate by a penny. The bottom line also reflected a rise of 26.1% from the prior-year quarter.

ARCC’s results were primarily aided by an improvement in total investment income. Also, the company’s portfolio activity was robust in the quarter. However, an increase in expenses hurt the results to some extent.

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