Business development company Ares Capital’s (NASDAQ:ARCC) Q1 earnings are expected to be strong when it reports its results on May 1, before the bell, as the company continues to reap benefits from the higher-for-longer rate environment.
The Federal Reserve has kept the interest rates unchanged for some months now amid hotter than expected inflation data, and as it awaits more evidence to show that the inflation is moving towards the targetted range.
The consensus EPS Estimate is $0.60 (+5.3% Y/Y) and the consensus Revenue Estimate is $703.85M (+13.9% Y/Y).
“Against the backdrop of higher for longer and at the same time, increasing risk of corporate distress and a continued inactivity in the M&A and capital markets space, ARCC has become a more enticing investment, especially compared to most other BDCs,” said SA analyst, Roberts Berzins.
SA analyst, The Gaming Dividend said, “The probability of rate cuts has decreased due to high inflation and a strong labor market, which is beneficial for BDCs like ARCC.”
ARCC’s diversified portfolio and strong financials make it an attractive option for investors seeking high dividend yields, added The Gaming Dividend.
Last quarter the company posted better-than-expected Q4 earnings as interest income from its investments bolstered its net investment income.
“The company’s exposure to software and healthcare helps mitigate risks associated with cyclical industries,” said SA analyst, JR Research.
Over the last 2 years, ARCC has beaten EPS estimates 75% of the time and has beaten revenue estimates 63% of the time.
Over the last 3 months, EPS estimates have seen 10 upward revisions and 3 downward. Revenue estimates have seen 11 upward revisions and 1 downward.
Shares in the company were up 3.9% since the start of the year.
