Ares Capital (NASDAQ:ARCC)‘s stock had its “buy” rating reiterated by research analysts at National Securities in a report issued on Thursday. They currently have a $19.00 target price on the investment management company’s stock. National Securities’ price objective indicates a potential upside of 18.16% from the company’s previous close.
The analysts wrote, “• For 4Q17, ARCC posted core NII/share of $0.38, a penny shy of our estimate but matching the quarterly dividend. We were, and are still, puzzled by what we see as a discounted valuation on ARCC shares. The market seemed to, for whatever reason, think that ARCC would not achieve dividend coverage despite acquiring ACAS for cash and stock, issuing a significant amount of shares, and having to recycle many lower yielding or non-yielding assets into its own originations. We think that as the company continues to make excellent progress in the recycling of these assets and ramps the SDLP that core NII will cover the dividend even absent the $10.0 million in fee waivers the external manager has granted the company for up to 10 quarters subsequent to the ACAS deal closing. This will likely be up a positive catalyst for shares, in our opinion.
• Ares announced that its SDLP program is being expanded to more than double in size to $6.4 billion from $2.9 billion with additional capital from Varagaon, ARCC, and a “leading global insurance company” being invested in the program that had a yield by cost of 14.5% as of 12/31/17. As a reminder, the SSLP loans were repurchased and the program wound down entirely in 2Q17. As of 4Q17, the SDLP was only 4.1% of the portfolio at cost and CLOs were 1.0%, leaving ARCC ample room to grow its 30% basket with the SDLP and bolster earnings.
• NAV/share improved to $16.65 from $16.49 Q/Q as sizable realized losses of $123.0 million (primarily pertaining to Infilaw Holdings) was offset by unrealized gains of $215.0 million largely from reversal of prior period depreciation and some positive marks on the portfolio.
• We are revising our 2018 core NII/share estimate to $1.63 from $1.61 and are rolling out our 2019 core NII/share estimate of $1.70.”
Several other equities analysts also recently commented on ARCC. Jefferies Group restated a “buy” rating and set a $19.50 target price on shares of Ares Capital in a research report on Friday, November 3rd. Zacks Investment Research downgraded Ares Capital from a “hold” rating to a “sell” rating in a research report on Monday, November 6th. TheStreet downgraded Ares Capital from a “b” rating to a “c+” rating in a research report on Monday, November 13th. Wedbush started coverage on Ares Capital in a research report on Monday, November 27th. They set an “outperform” rating and a $18.00 target price for the company. Finally, BidaskClub downgraded Ares Capital from a “sell” rating to a “strong sell” rating in a research report on Tuesday, December 5th. Two investment analysts have rated the stock with a sell rating, two have assigned a hold rating and eight have issued a buy rating to the stock. The stock presently has a consensus rating of “Buy” and a consensus price target of $18.00.
Ares Capital (NASDAQ:ARCC) last announced its quarterly earnings data on Tuesday, February 13th. The investment management company reported $0.38 EPS for the quarter, topping the Zacks’ consensus estimate of $0.37 by $0.01. Ares Capital had a return on equity of 8.45% and a net margin of 57.50%. The company had revenue of $307.00 million during the quarter, compared to the consensus estimate of $301.38 million. During the same quarter last year, the company earned $0.42 EPS. The company’s quarterly revenue was up 17.6% on a year-over-year basis. sell-side analysts expect that Ares Capital will post 1.56 earnings per share for the current fiscal year.
A number of hedge funds have recently added to or reduced their stakes in the stock. Paloma Partners Management Co increased its holdings in Ares Capital by 155.7% during the 4th quarter. Paloma Partners Management Co now owns 29,101 shares of the investment management company’s stock valued at $458,000 after purchasing an additional 17,721 shares in the last quarter. HBK Investments L P increased its holdings in Ares Capital by 2.6% during the 4th quarter. HBK Investments L P now owns 154,445 shares of the investment management company’s stock valued at $2,428,000 after purchasing an additional 3,945 shares in the last quarter. Two Sigma Securities LLC acquired a new stake in Ares Capital during the 4th quarter valued at $249,000. Two Sigma Investments LP increased its holdings in Ares Capital by 1,217.0% during the 4th quarter. Two Sigma Investments LP now owns 1,739,696 shares of the investment management company’s stock valued at $27,348,000 after purchasing an additional 1,607,603 shares in the last quarter. Finally, Two Sigma Advisers LP increased its holdings in Ares Capital by 43.8% during the 4th quarter. Two Sigma Advisers LP now owns 955,455 shares of the investment management company’s stock valued at $15,020,000 after purchasing an additional 291,000 shares in the last quarter. 43.62% of the stock is owned by hedge funds and other institutional investors.
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About Ares Capital
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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