National Securities reissued their buy rating on shares of Ares Capital (NASDAQ:ARCC) in a research report released on Thursday. The brokerage currently has a $19.00 price target on the investment management company’s stock.
“ ARCC posted a very strong $0.45/share of core NII in 3Q18, four cents above our $0.41 estimate. The beat was largely due to capital structuring service fees from non-affiliate investments which we modeled to be $23.8 million for the quarter but came in at $39.0 million.
As a reminder, Ares recognizes the economics of origination fees up-front and this quarter the company had originations totaling $1.95 billion.
ARCC had a record quarter of net realized gains totaling $373.0 million or $0.87/share, with $0.67/share coming solely from the sale of Alcami. The proceeds from the sale were more than double what the company paid for it in the ACAS acquisition.
On the earnings call, management commented that they will not have to pay a special dividend to remain in compliance with the ’40 Act as they still have losses from the old acquisition of Allied Capital to offset the sizable realized gains. However, this will not impact GAAP earnings or NAV. Ares plans to give more detail on spillover income on its 4Q18 earnings call.
ACAS assets at fair value finished the quarter at $728 million, down from $1.47 billion Q/Q. About half of the remaining assets are considered “non-core” and will likely be sold.
While the rotation out of ACAS assets into direct originations has provided a good tailwind for yield and thus earnings, we now expect much of the earnings growth to come from Ares experiencing net portfolio growth and increasing ROE via increases in balance sheet leverage.
We are revising our 2018 core NII/share estimate to $1.68 from $1.64 and our 2019 core NII/share estimate to $1.75 from $1.74 and maintaining our BUY rating and $19 price target.,” the firm’s analyst wrote.
Several other equities analysts also recently commented on the company. Zacks Investment Research raised Ares Capital from a hold rating to a buy rating and set a $18.00 price objective on the stock in a research report on Wednesday, October 24th. BidaskClub raised Ares Capital from a sell rating to a hold rating in a research report on Tuesday, October 16th. Finally, Citigroup began coverage on Ares Capital in a research report on Thursday, August 23rd. They issued a buy rating and a $19.00 price objective on the stock. Two analysts have rated the stock with a hold rating and eight have given a buy rating to the company. Ares Capital currently has an average rating of Buy and an average price target of $18.13.
Shares of Ares Capital stock opened at $17.15 on Thursday. The firm has a market capitalization of $7.31 billion, a price-to-earnings ratio of 12.34, a price-to-earnings-growth ratio of 3.53 and a beta of 0.60. The company has a debt-to-equity ratio of 0.62, a quick ratio of 2.41 and a current ratio of 2.41. Ares Capital has a 52 week low of $15.03 and a 52 week high of $17.58.
Ares Capital (NASDAQ:ARCC) last announced its quarterly earnings data on Wednesday, October 31st. The investment management company reported $0.45 EPS for the quarter, beating the Thomson Reuters’ consensus estimate of $0.40 by $0.05. The company had revenue of $342.00 million for the quarter, compared to the consensus estimate of $320.15 million. Ares Capital had a return on equity of 9.34% and a net margin of 72.13%. Ares Capital’s quarterly revenue was up 16.3% on a year-over-year basis. During the same quarter in the prior year, the company posted $0.36 EPS. On average, equities analysts expect that Ares Capital will post 1.62 EPS for the current fiscal year.
The company also recently announced a quarterly dividend, which will be paid on Friday, December 28th. Shareholders of record on Friday, December 14th will be issued a $0.39 dividend. This represents a $1.56 annualized dividend and a dividend yield of 9.10%. The ex-dividend date is Thursday, December 13th. Ares Capital’s dividend payout ratio is 112.23%.
In other news, Director Bates Ann Torre bought 9,000 shares of the stock in a transaction on Wednesday, August 29th. The stock was acquired at an average cost of $17.44 per share, for a total transaction of $156,960.00. Following the acquisition, the director now owns 20,000 shares of the company’s stock, valued at $348,800. The acquisition was disclosed in a document filed with the SEC, which can be accessed through the SEC website. Also, Director Eric B. Siegel bought 6,990 shares of the stock in a transaction on Wednesday, September 12th. The stock was purchased at an average price of $17.30 per share, with a total value of $120,927.00. Following the completion of the acquisition, the director now directly owns 36,630 shares in the company, valued at approximately $633,699. The disclosure for this purchase can be found here. Insiders acquired a total of 16,590 shares of company stock valued at $288,055 over the last quarter. Company insiders own 0.49% of the company’s stock.
Hedge funds have recently modified their holdings of the business. Rehmann Capital Advisory Group lifted its stake in shares of Ares Capital by 43.5% during the 2nd quarter. Rehmann Capital Advisory Group now owns 9,658 shares of the investment management company’s stock worth $159,000 after purchasing an additional 2,930 shares during the last quarter. Bard Associates Inc. lifted its stake in shares of Ares Capital by 18.7% during the 2nd quarter. Bard Associates Inc. now owns 19,080 shares of the investment management company’s stock worth $314,000 after purchasing an additional 3,000 shares during the last quarter. Penbrook Management LLC lifted its stake in shares of Ares Capital by 29.0% during the 2nd quarter. Penbrook Management LLC now owns 16,025 shares of the investment management company’s stock worth $264,000 after purchasing an additional 3,600 shares during the last quarter. Financial Advantage Inc. lifted its stake in shares of Ares Capital by 1.4% during the 3rd quarter. Financial Advantage Inc. now owns 286,813 shares of the investment management company’s stock worth $4,930,000 after purchasing an additional 3,871 shares during the last quarter. Finally, Cliffwater LLC lifted its stake in shares of Ares Capital by 1.4% during the 2nd quarter. Cliffwater LLC now owns 287,761 shares of the investment management company’s stock worth $4,734,000 after purchasing an additional 3,978 shares during the last quarter. Institutional investors and hedge funds own 40.47% of the company’s stock.
About Ares Capital
Ares Capital Corporation is a business development company specializing in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle market companies. It also makes growth capital and general refinancing. It prefers to make investments in companies engaged in the basic and growth manufacturing, business services, consumer products, health care products and services, and information technology service sectors.
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