Ares Capital (ARCC) Down 1.8% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Ares Capital (ARCC). Shares have lost about 1.8% in that time frame, outperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Ares Capital due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts. Ares Capital Q4 Earnings Miss as Expenses Increase Y/YAres Capital’s fourth-quarter 2024 core earnings of 55 cents per share missed the Zacks Consensus Estimate of 58 cents. The bottom line reflects a decline of 12.7% from the prior-year quarter.The results were primarily affected by an increase in expenses. Nonetheless, an improvement in the total investment income and the company’s robust portfolio activities supported the results to some extent.GAAP net income was $357 million or 55 cents per share, down from $413 million or 72 cents per share in the prior-year quarter.For 2024, core earnings of $2.33 per share missed the Zacks Consensus Estimate of $2.36. The bottom line declined 1.7% from 2023. GAAP net income was $1.52 billion, stable compared to the previous year.Total Investment Income Improves, Expenses RiseTotal investment income was $759 million, up 7.4% year over year. The rise was largely driven by an increase in interest income from investments, capital structuring service fees and dividend income. The top line, however, lagged the Zacks Consensus Estimate of $785 million.Full-year total investment income was $2.99 billion, up 14.4% year over year. The top line lagged the Zacks Consensus Estimate of $3.02 billion.Total quarterly expenses were $387 million, up 9.6% year over year. The increase was due to a rise in all the components except capital gains incentive fee charges and administrative fees.Robust Portfolio ActivitiesIn the fourth quarter, the company made gross commitments worth $3.75 billion to new and existing portfolio companies. This compares with $2.38 billion of gross commitments in the prior-year quarter.Further, the company exited $2.72 billion of commitments compared with $1.43 billion a year ago.The fair value of Ares Capital’s portfolio investments was $26.7 billion as of Dec. 31, 2024.The fair value of accruing debt and other income-producing securities was $23.6 billion.Balance Sheet StrongAs of Dec. 31, 2024, the company’s cash and cash equivalents totaled $635 million, up from $535 million as of Dec. 31, 2023.Ares Capital had $5.1 billion available for additional borrowings under the existing credit facilities as of Dec. 31, 2024. Total outstanding debt was $13.8 billion.As of Dec. 31, 2024, total assets were $28.3 billion and stockholders’ equity was $13.4 billion.Net asset value was $19.89 per share, up from $19.24 as of Dec. 31, 2023.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a downward trend in estimates revision.VGM ScoresAt this time, Ares Capital has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ares Capital has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Just Released: Zacks Top 10 Stocks for 2025Hurry – you can still get in early on our 10 top tickers for 2025. Handpicked by Zacks Director of Research Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2025. You can still be among the first to see these just-released stocks with enormous potential. See New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ares Capital Corporation (ARCC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks