Quarterly earnings results are a good time to check in on a company’s progress, especially compared to its peers in the same sector. Today we are looking at Oaktree Specialty Lending (NASDAQ: OCSL) and the best and worst performers in the specialty finance industry.
Specialty finance companies provide targeted lending or financial services for specific industries or needs. They benefit from expertise in particular sectors, often reduced competition in specialized niches, and tailored underwriting that can yield higher margins. Challenges include concentration risk in specific industries, difficulty achieving scale efficiencies, and potential vulnerability during sector-specific downturns affecting their specialized markets.
The 12 specialty finance stocks we track reported a satisfactory Q2. As a group, revenues missed analysts’ consensus estimates by 3.8%.
In light of this news, share prices of the companies have held steady. On average, they are relatively unchanged since the latest earnings results.
Weakest Q2: Oaktree Specialty Lending (NASDAQ: OCSL)
Managed by Oaktree Capital Management, one of the world's premier alternative investment firms, Oaktree Specialty Lending (NASDAQ: OCSL) is a business development company that provides customized financing solutions to mid-market companies across various industries.
Oaktree Specialty Lending reported revenues of $75.27 million, down 20.7% year on year. This print fell short of analysts’ expectations by 4.6%. Overall, it was a disappointing quarter for the company with a significant miss of analysts’ AUM estimates and a miss of analysts’ revenue estimates.
“During the quarter, we further diversified our portfolio and amended and extended our credit facility on more favorable terms,” stated Armen Panossian, Chief Executive Officer and Co-Chief Investment Officer, “While we made progress in positioning our portfolio for long-term success, certain non-cash items impacted net investment income this quarter.
Unsurprisingly, the stock is down 2.1% since reporting and currently trades at $13.22.
Read our full report on Oaktree Specialty Lending here, it’s free for active Edge members.
Best Q2: Encore Capital Group (NASDAQ: ECPG)
Operating in the often misunderstood world of debt collection since 1999, Encore Capital Group (NASDAQ: ECPG) purchases portfolios of defaulted consumer debt at deep discounts and works with individuals to recover these obligations while helping them toward financial recovery.
Encore Capital Group reported revenues of $442.1 million, up 24.4% year on year, outperforming analysts’ expectations by 15.3%. The business had an incredible quarter with a beat of analysts’ EPS and revenue estimates.
Encore Capital Group pulled off the fastest revenue growth among its peers. The market seems happy with the results as the stock is up 12.2% since reporting. It currently trades at $42.
Is now the time to buy Encore Capital Group? Access our full analysis of the earnings results here, it’s free for active Edge members.
New Mountain Finance (NASDAQ: NMFC)
Operating as a financial bridge for growing businesses that might be overlooked by traditional banks, New Mountain Finance (NASDAQ: NMFC) is a business development company that provides loans and debt financing to middle-market companies in defensive growth industries.
New Mountain Finance reported revenues of $83.49 million, down 11.7% year on year, falling short of analysts’ expectations by 1.6%. It was a slower quarter as it posted a miss of analysts’ revenue estimates.
As expected, the stock is down 10.3% since the results and currently trades at $9.24.
Read our full analysis of New Mountain Finance’s results here.
HA Sustainable Infrastructure Capital (NYSE: HASI)
With a proprietary "CarbonCount" metric that quantifies the environmental impact of each dollar invested, HA Sustainable Infrastructure Capital (NYSE: HASI) is an investment firm that finances and develops climate-positive infrastructure projects across renewable energy, energy efficiency, and ecological restoration.
HA Sustainable Infrastructure Capital reported revenues of $103.6 million, up 4.2% year on year. This result topped analysts’ expectations by 32.1%. Overall, it was a very strong quarter as it also produced an impressive beat of analysts’ revenue estimates and full-year EPS guidance exceeding analysts’ expectations.
HA Sustainable Infrastructure Capital scored the biggest analyst estimates beat among its peers. The stock is up 18.1% since reporting and currently trades at $28.82.
Ares Capital (NASDAQ: ARCC)
As one of the largest business development companies in the United States with over $20 billion in assets, Ares Capital (NASDAQ: ARCC) is a business development company that provides financing solutions to middle-market companies, primarily through direct loans and equity investments.
Ares Capital reported revenues of $745 million, down 1.3% year on year. This number lagged analysts' expectations by 0.6%. Overall, it was a slower quarter as it also produced a slight miss of analysts’ revenue estimates.
The stock is down 13.8% since reporting and currently trades at $19.55.
Read our full, actionable report on Ares Capital here, it’s free for active Edge members.
Market Update
Thanks to the Fed’s series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% in November), and a notable surge followed Donald Trump’s presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by potential trade policy changes and corporate tax discussions, which could impact business confidence and growth. The path forward holds both optimism and caution as new policies take shape.
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