Can Rising Rates Support Main Street's (MAIN) Q4 Earnings?

Main Street Capital Corporation (NYSE:MAIN) is slated to announce fourth quarter and 2018 results on Feb 28, after market close. While its revenues are expected to grow year over year, earnings might decline.

Notably, the company has an impressive earnings surprise history. It surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 5.4%.

In the last reported quarter, the company witnessed an upsurge in total investment income, partially offset by rise in expenses.

However, activities of the company during the fourth quarter were inadequate to win analysts’ confidence. As a result, the consensus estimate for earnings of 63 cents has remained unchanged over the past 30 days. Also, the figure reflects a year-over-year decline of 1.6%.

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

Factors at Play

Loan Growth: The company’s efforts to grow loan portfolio through its several marketing efforts are likely to have attracted new clients and thus result in higher loans originations in this quarter, especially in lower middle market.

Overall Revenues to Rise: Given the rising interest rates, Main Street is likely to have witnessed growth in net investment income (NII) during the quarter. Notably, per the consensus estimate, total revenues are expected to grow 6.8% from the year-ago quarter.

Also, per preliminary estimates released by the company, NII is expected to be in the range of 68 cents to 69 cents per share.

Expenses to Rise: Main Street has been witnessing persistent rise in general and compensation-related expenses over the past several quarters. The same trend is likely to have persisted in the to-be-reported quarter.

Earnings Whispers

Now, let’s check what our quantitative model predicts.

According to our quantitative model, it cannot be conclusively predicted if Main Street will be able to beat estimates this time. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — to be confident of an earnings surprise call.

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

Earnings ESP: The Earnings ESP for Main Street is 0.00%.

Zacks Rank: Main Street has a Zacks Rank #3. While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings beat.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Schedule of Other Companies

BARINGS BDC, INC. (NYSE:BBDC) and Bain Capital Specialty Finance, Inc. (NYSE:BCSF) are scheduled to report results on Feb 28. Horizon Technology Finance Corporation (NASDAQ:HRZN) will release results on Mar 5.

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