National Securities Reaffirms “Buy” Rating for Ares Capital Corporation (ARCC)
Ares Capital Corporation (NASDAQ:ARCC)‘s stock had its “buy” rating reiterated by equities research analysts at National Securities in a note issued to investors on Friday. They presently have a $19.00 target price on the investment management company’s stock. National Securities’ target price would indicate a potential upside of 19.87% from the company’s current price.
The analysts wrote, “• ARCC posted core NII/share of $0.36, a penny shy of our estimate but exceeding consensus estimates of $0.35. The past two quarters since the purchase of ACAS, ARCC’s dividend coverage has improved and with the fee waivers in place for up to ten quarters since the purchase, we continue to expect dividend coverage to improve as the remaining $875 million of ACAS assets on the block are sold and recycled into higher yielding investments.
• Management identified the non-core assets as having a weighted average yield of 7.6% and the yield by cost on ARCC’s debt and other income producing securities was 9.6% in 3Q17. As the rotation into direct originations from the disposition of ACAS assets continues Ares will also have the benefit of increased capital structuring fees. Despite a frothy and complacent market, we think that many reputable sponsors not only value but require certainty of closing on large transactions.
• With the complete exit of the SSLP the 30% basket at Ares freed up substantially, with the new SDLP only 3.7% of the portfolio at cost with a 14.0% yield by cost as of 9/30/17. While it remains unclear of whether ARCC can expedite the ramping of this by placing the purchased SSLP loans into the new JV, we nonetheless expect the company to continue to steadily allocate capital to the SDLP which would serve to augment the yield on the portfolio considerably when contrasted with yields on both ACAS and proprietary assets in the portfolio.
• We are maintaining our 2017 core NII/share estimate of $1.46 and are revising our 2018 core NII/share estimate to $1.61 from $1.65.”
A number of other analysts have also recently weighed in on ARCC. Jefferies Group LLC reissued a “buy” rating and issued a $19.50 target price on shares of Ares Capital Corporation in a research note on Friday, July 14th. BidaskClub cut shares of Ares Capital Corporation from a “hold” rating to a “sell” rating in a research note on Wednesday, July 19th. Zacks Investment Research cut shares of Ares Capital Corporation from a “hold” rating to a “sell” rating in a research note on Wednesday, August 2nd. TheStreet raised shares of Ares Capital Corporation from a “c+” rating to a “b” rating in a research note on Monday, August 7th. Finally, BMO Capital Markets reissued a “hold” rating and issued a $15.00 target price on shares of Ares Capital Corporation in a research note on Friday, August 25th. Two investment analysts have rated the stock with a sell rating, two have assigned a hold rating and nine have issued a buy rating to the company. Ares Capital Corporation presently has an average rating of “Buy” and a consensus target price of $18.06.
Ares Capital Corporation (NASDAQ:ARCC) last announced its quarterly earnings data on Thursday, November 2nd. The investment management company reported $0.36 EPS for the quarter, beating the Zacks’ consensus estimate of $0.35 by $0.01. Ares Capital Corporation had a net margin of 44.61% and a return on equity of 8.95%. During the same quarter last year, the company earned $0.43 earnings per share.
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A number of institutional investors have recently modified their holdings of the business. Round Table Services LLC grew its stake in Ares Capital Corporation by 0.4% during the second quarter. Round Table Services LLC now owns 10,225 shares of the investment management company’s stock worth $167,000 after buying an additional 39 shares during the last quarter. Alpha Omega Wealth Management LLC grew its stake in Ares Capital Corporation by 1.7% during the second quarter. Alpha Omega Wealth Management LLC now owns 12,184 shares of the investment management company’s stock worth $200,000 after buying an additional 199 shares during the last quarter. Hudock Capital Group LLC grew its stake in Ares Capital Corporation by 3.2% during the second quarter. Hudock Capital Group LLC now owns 6,500 shares of the investment management company’s stock worth $106,000 after buying an additional 200 shares during the last quarter. Honkamp Krueger Financial Services Inc. grew its stake in Ares Capital Corporation by 2.0% during the second quarter. Honkamp Krueger Financial Services Inc. now owns 13,472 shares of the investment management company’s stock worth $221,000 after buying an additional 260 shares during the last quarter. Finally, M&R Capital Management Inc. grew its stake in Ares Capital Corporation by 2.8% during the second quarter. M&R Capital Management Inc. now owns 11,755 shares of the investment management company’s stock worth $188,000 after buying an additional 320 shares during the last quarter. 45.15% of the stock is currently owned by hedge funds and other institutional investors.
Ares Capital Corporation Company Profile
Ares Capital Corporation is a specialty finance company. The Company operates as a closed-end, non-diversified management investment company. The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. It invests primarily in the United States middle-market companies.
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