Ares Capital’s (NASDAQ:ARCC) Q3 earnings are expected to benefit from the higher interest rate enviroment.
The business development company is scheduled to announce its Q3 earnings results on Tuesday, October 24th, before market open.
The consensus EPS estimate is $0.58 (+16.0% Y/Y) and the consensus revenue estimate is $659.14M (+22.7% Y/Y).
Ares Capital focuses on middle market companies in the U.S., with investments ranging from $30M to $500M. The higher for longer rate environment is expected to benefit ARCC as banks become less likely to service middle market companies, allowing the company to lend at higher rates.
The rates senario is expected to benefit the company’s core EPS, given the exposure of its floating-rate debt portfolio.
The company has a diverse portfolio and has historically prioritized investing in secured debt. It shifted towards equity investments for stronger returns, and the returns have been strong enough in recent years.
The Q2 results had surpassed consensus estimates as investment activity picked up and portfolio yields increased. As of July 19, Ares Capital had said that it had an investment backlog of ~$425M and pipeline of $45M. From July 1 through July 19, the company made new investment commitments of ~$211M and exited ~$118M of investment commitments.
Over the last 2 years, ARCC has beaten EPS estimates 75% of the time and revenue estimates 75% of the time.
Over the last 3 months, EPS estimates have seen 8 upward revisions and 5 downward revisions. Revenue estimates have seen 9 upward revisions and 0 downward revision.