What's In The Cards For Ares Capital (ARCC) In Q4 Earnings?

Ares Capital Corporation (NASDAQ:ARCC) is scheduled to announce fourth quarter and 2018 results on Feb 12, before the market opens. Its quarterly revenues and earnings are projected to grow year over year.

In the last reported quarter, the company’s bottom line surpassed the Zacks Consensus Estimate. Results benefited from an increase in total investment income and healthy portfolio activity, partly offset by higher expenses.

The company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 5.2%.

Ares Capital Corporation Price and EPS Surprise

Ares Capital Corporation Price and EPS Surprise | Ares Capital Corporation Quote

Activities of the company in the fourth quarter were adequate to win analysts’ confidence. As a result, the consensus estimate for earnings of 41 cents moved 2.5% upward over the past 30 days. Also, it reflects a year-over-year improvement of 7.9%.

Further, the Zacks Consensus Estimate for sales of $327.2 million reflects growth of 6.6% on a year-over-year basis.

Before we take a look at what our quantitative model predicts for the to-be-reported quarter, let’s check the factors that are likely to impact the results.

Factors to Impact Q4 Results

Given the expectation of higher prepayment activity during the fourth quarter, total investment income is likely to be positively impacted. Also, with the recent increase in LIBOR rates, Ares Capital’s floating-rate debt investments that are tied to LIBOR will support investment income.

However, the company has been witnessing higher expenses over the past several quarters. As Ares Capital continues to invest in the venture growth stage companies, operating expenses are likely to remain elevated.

Why a Positive Earnings Surprise?

According to our quantitative model, the chances of Ares Capital beating the Zacks Consensus Estimate are high this time. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Ares Capital has an Earnings ESP of +1.10%.

Zacks Rank: Ares Capital currently carries a Zacks Rank #3, which further increases the predictive power of ESP.

Other Stocks That Warrant a Look

Here are some other finance stocks that you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.

Bank of Montreal (TO:BMO) is slated to release results on Feb 26. The company has an Earnings ESP of +0.30% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bank of Nova Scotia (TO:BNS) is scheduled to release results on Feb 26. It has an Earnings ESP of +0.89% and carries a Zacks Rank #3.

Garrison Capital Inc. (NASDAQ:GARS) has an Earnings ESP of +11.94% and has a Zacks Rank #2 (Buy). It is scheduled to report results on Mar 5.

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