A month has gone by since the last earnings report for Owl Rock Capital Corporation (ORCC). Shares have added about 6.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Owl Rock Capital Corporation due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Owl Rock Capital Q1 Earnings Beat, Revenues Rise Y/Y
Owl Rock Capital Corporation reported first-quarter 2023 earnings per share of 45 cents, which beat the Zacks Consensus Estimate by a penny. The bottom line also improved from 31 cents a year ago. The results were supported by growth in the portfolio, increased interest rates and record net investment income. However, the positives were partially offset by higher costs.
The total investment income of ORCC amounted to $377.6 million, which increased from $350.5 million a year ago. The top line beat the Zacks Consensus Estimate by 3.4% and our estimate of $313 million.
Net investment income rose to $177.9 million from $122.4 million a year ago.
Total new investment commitments were $175.1 million across three new portfolio companies and eight existing ones. The metric plunged 67% year over year in the quarter under review.
Owl Rock Capital ended the first quarter with investments in 187 portfolio companies, backed by an aggregate fair value of $13.2 billion. Based on the fair value, the average investment size in each portfolio company was $70.4 million as of Mar 31, 2023.
Total expenses escalated to $196.4 million in the first quarter from $141 million a year ago, primarily due to higher interest expenses, gross management, incentive fees and other general and administrative expenses.
The company recorded a net income of $201.8 million in the first quarter, up from $44 million in the prior-year quarter.
Financial Update (as of Mar 31, 2023)
Owl Rock Capital exited the first quarter with cash and restricted cash of $399.5 million, which declined from $455.1 million as of Dec 31, 2022. Total assets of $13.7 billion increased from $13.5 billion at 2022-end.
Debt was $7.4 billion, up from $7.2 billion at 2022-end. ORCC had $1.3 billion of undrawn capacity under its credit facilities.
Net cash from operating activities in the first quarter was $46.3 million compared with the prior year’s cash usage of $13.5 million.
At first-quarter end, net debt to equity was 1.21X compared with 1.19X at 2022-end.
Dividend & Repurchase Update
The board of directors at Owl Rock Capital declared a second-quarter 2023 dividend of 33 cents per share to be paid out on or before Jul 14, 2023, to shareholders of record as of Jun 30, 2023. It also provided a first-quarter 2023 supplemental dividend of 6 cents per share.
ORCC brought in a share buyback program of $150 million on Nov 1, 2022, with a life span of 18 months. As of May 10, 2023, $73.7 million of ORCC stock was purchased, of which 66.6% was bought by ORCC at a price of $12.22 per share.
Most of Owl Rock Capital’s assets are floating, so an improving interest rate environment is projected to drive net investment income. Included in investment income are pre-payment fees, which are expected to increase as the interest rate stabilizes, thereby increasing repayments.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
At this time, Owl Rock Capital Corporation has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Owl Rock Capital Corporation has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Owl Rock Capital Corporation belongs to the Zacks Financial - Miscellaneous Services industry. Another stock from the same industry, Euronet Worldwide (EEFT), has gained 1.5% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.
Euronet Worldwide reported revenues of $787.2 million in the last reported quarter, representing a year-over-year change of +9.6%. EPS of $0.87 for the same period compares with $0.69 a year ago.
For the current quarter, Euronet Worldwide is expected to post earnings of $2.01 per share, indicating a change of +16.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.3% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Euronet Worldwide. Also, the stock has a VGM Score of B.
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