Shares of Ares Capital Corporation ARCC fell 3% in Wednesday’s trading session on lower-than-expected results. Its fourth-quarter 2024 core earnings of 55 cents per share missed the Zacks Consensus Estimate of 58 cents. The bottom line reflects a decline of 12.7% from the prior-year quarter.

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The results were primarily affected by an increase in expenses. Nonetheless, an improvement in the total investment income and the company’s robust portfolio activities supported the results to some extent.

GAAP net income was $357 million or 55 cents per share, down from $413 million or 72 cents per share in the prior-year quarter.

For 2024, core earnings of $2.33 per share missed the Zacks Consensus Estimate of $2.36. The bottom line declined 1.7% from 2023. GAAP net income was $1.52 billion, stable compared to the previous year.

Ares Capital’s Total Investment Income Improves, Expenses Rise

Total investment income was $759 million, up 7.4% year over year. The rise was largely driven by an increase in interest income from investments, capital structuring service fees and dividend income. The top line, however, lagged the Zacks Consensus Estimate of $785 million.

Full-year total investment income was $2.99 billion, up 14.4% year over year. The top line lagged the Zacks Consensus Estimate of $3.02 billion.

Total quarterly expenses were $387 million, up 9.6% year over year. The increase was due to a rise in all the components except capital gains incentive fee charges and administrative fees.

Portfolio Activities Robust for ARCC

In the fourth quarter, the company made gross commitments worth $3.75 billion to new and existing portfolio companies. This compares with $2.38 billion of gross commitments in the prior-year quarter.

Further, the company exited $2.72 billion of commitments compared with $1.43 billion a year ago.

The fair value of Ares Capital’s portfolio investments was $26.7 billion as of Dec. 31, 2024.

The fair value of accruing debt and other income-producing securities was $23.6 billion.

Ares Capital’s Balance Sheet Strong

As of Dec. 31, 2024, the company’s cash and cash equivalents totaled $635 million, up from $535 million as of Dec. 31, 2023.

Ares Capital had $5.1 billion available for additional borrowings under the existing credit facilities as of Dec. 31, 2024. Total outstanding debt was $13.8 billion.

As of Dec. 31, 2024, total assets were $28.3 billion and stockholders’ equity was $13.4 billion.

Net asset value was $19.89 per share, up from $19.24 as of Dec. 31, 2023.

Our Take on ARCC

Driven by the rise in the demand for customized financing, growth in total investment income is expected to continue in the quarters ahead. Increased investment commitments will likely keep supporting the company’s financials. However, its expansion strategies might lead to a rise in costs in the near term, which is expected to hurt the bottom line. Further, regulatory constraints pose another major headwind.

Currently, ARCC carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Finance Stocks

Apollo Global Management, LLC APO reported fourth-quarter 2024 adjusted net income (ANI) per share of $1.91, which beat the Zacks Consensus Estimate of $1.89. However, the reported figure compared unfavorably with ANI of $2.22 per share reported in the year-ago period.

APO’s results were primarily aided by a rise in assets under management balances and a decline in expenses. However, lower revenues acted as a headwind during the quarter.

UMB Financial Corp. UMBF reported fourth-quarter 2024 operating earnings per share of $2.49, which beat the Zacks Consensus Estimate of $2.30. Also, the bottom line compared favorably with $2.29 per share earned in the year-ago quarter.

Results benefited from higher net interest income and non-interest income. Rising loan and deposit balances were other positives. However, worsening credit quality acted as a spoilsport for UMBF.

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