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Prospect Capital (PSEC) Up 8.5% on Q3 Earnings & Revenue Beat

Zacks Equity Research

Prospect Capital Corporation’s PSEC shares gained 8.5% in response to third-quarter fiscal 2020 (ended Mar 31) results.  Net investment income of 19 cents per share beat the Zacks Consensus Estimate of 14 cents. However, the bottom line decreased 9.5% year over year.

The results benefited from a fall in operating expenses and solid origination volume. However, lower revenues and a decline in the value of its investment portfolio were the undermining factors.

Net investment income came in at $68.5 million, down 11.4% from the prior-year quarter.

Total Investment Income & Expenses Down

Total investment income was $154.5 million, down 9.7% year over year. The fall was mainly due to lower dividend income and interest income. Nonetheless, the figure beat the Zacks Consensus Estimate of $129 million.

Total operating expenses fell 8.3% from the prior-year quarter to $86 million.

Total Portfolio Value & Originations

The fair value of Prospect Capital’s total investment portfolio was $5.14 billion as of Mar 31, 2020, down 9% year over year.

In the reported quarter, the company originated $402.4 million in new and follow-on investments.

Balance Sheet

As of Mar 31, 2020, Prospect Capital’s net asset value was $7.98 per share compared with $9.01 on Jun 30, 2019. Further, the company had $3.56 billion of unencumbered assets as of the same date.

At the end of the quarter, net of cash debt to equity ratio was 74.1%, up from 69.1% as of Mar 31, 2019.

Our Take

Prospect Capital’s loan origination activity continues to be on track. It strategically deploys capital while maintaining a balanced and diversified approach across various industries and sectors. However, elevated expense levels are expected to hurt the bottom line to some extent.

Prospect Capital Corporation Price, Consensus and EPS Surprise

Prospect Capital Corporation Price, Consensus and EPS Surprise

Prospect Capital Corporation price-consensus-eps-surprise-chart | Prospect Capital Corporation Quote

Currently, Prospect Capital 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 Stocks

Hercules Capital Inc.’s HTGC first-quarter 2020 net investment income of 37 cents per share outpaced the Zacks Consensus Estimate by a penny. The bottom line also grew 23.3% from the year-ago reported figure.

Ares Capital Corporation’s ARCC first-quarter 2020 core earnings of 41 cents per share missed the Zacks Consensus Estimate of 43 cents. Also, the bottom line declined 14.6% year over year.

Victory Capital Holdings VCTR reported first-quarter 2020 adjusted earnings of 92 cents per share that surpassed the Zacks Consensus Estimate of 90 cents. Also, the bottom line compared favorably with 35 cents reported in the prior-year quarter.

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