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What's in the Cards for Ares Capital (ARCC) in Q1 Earnings?

Zacks Equity Research

Ares Capital Corporation ARCC is scheduled to announce first-quarter 2019 results on Apr 30, before the market opens. Its revenues and earnings are projected to grow year over year.

In the last reported quarter, the company’s bottom line surpassed the Zacks Consensus Estimate. Results benefited from an increase in total investment income and healthy portfolio activity. Moreover, lower expenses were a tailwind.

In fact, the company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three and met in one of the trailing four quarters, the average beat being 6.9%.

Ares Capital Corporation Price and EPS Surprise
 

Ares Capital Corporation Price and EPS Surprise | Ares Capital Corporation Quote

However, activities of the company in the first quarter failed to win analysts’ confidence. As a result, the consensus estimate for earnings of 42 cents has remained unchanged over the past 30 days. Nonetheless, it reflects a year-over-year improvement of 7.7%.

Further, the Zacks Consensus Estimate for sales of $336.4 million reflects growth of 6.1% on a year-over-year basis.

Before we take a look at what our quantitative model predicts for the to-be-reported quarter, let’s check the factors that are likely to impact the results.

Factors to Impact Q1 Results

Given the expectation of higher prepayment activity during the first quarter, total investment income is likely to be positively impacted. Also, with the increase in LIBOR rates, Ares Capital’s floating-rate debt investments, which are tied to LIBOR, are likely to support investment income.

However, the company has been witnessing higher expenses over the past several quarters. As Ares Capital continues to invest in the venture growth stage companies, operating expenses are likely to remain elevated.

Earnings Whispers

According to our quantitative model, it cannot be conclusively predicted whether Ares Capital will be able to beat the Zacks Consensus Estimate this time. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Ares Capital has an Earnings ESP of 0.00%.

Zacks Rank: The company currently carries a Zacks Rank #3. While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings beat.

Stocks That Warrant a Look

Here are some finance stocks that you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.

Axos Financial, Inc. AX is slated to release results on Apr 30. It has an Earnings ESP of +0.26% and currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Solar Capital Ltd. SLRC has an Earnings ESP of +4.07% and currently carries a Zacks Rank #2 (Buy). The company is slated to release results on May 6.

Grupo Financiero Galicia S.A. GGAL is expected to release results on May 29. It presently has an Earnings ESP of +4.76% and a Zacks Rank #3.

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