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Main Street Capital (NYSE: MAIN) Fourth quarter earnings are estimated to benefit from a net increase in the fair value of the investment portfolio.
The business development company will announce fourth-quarter earnings results on Thursday, Feb. 22, after the market closes.
The company had published a positive result in the third quarter, as performance of most lower middle market companies and private lending portfolio companies continued to be strong. Furthermore, there was also a significant contribution from asset management activities.
MAIN’s fourth-quarter 2022 earnings and profits remained above average analyst estimates as higher average levels of investments in investment portfolio debt, as well as an increase in interest rates on investments in investment portfolio debt at variable rates, bode well for your total investment income.
The company estimates near-record net investment income in Q4’23, with net asset value per share increasing 3.0%-3.2% primarily due to increases in net fair value of the investment portfolio during the quarter. The BDC also said it originated new or increased commitments in its private loan portfolio during the quarter.
The consensus EPS estimate for the quarter is $1.07 (+3.9% Y/Y) and the consensus revenue estimate is $127.55 million (+12.0% Y/Y ).
Over the last two years, MAIN has beaten EPS estimates 100% of the time and revenue estimates 75% of the time.
Over the last 3 months, EPS and revenue estimates have undergone 3 upward revisions and 0 downward revisions.
Notably, the quarterly earnings season remained strong for most of MAIN’s peers. Ares Capital reported better-than-expected fourth-quarter earnings as interest income from its investments bolstered its net investment income. Golub Capital BDC’s earnings for the fiscal first quarter managed to beat analysts’ average estimate. Net asset value per share increased during the quarter.
Main Street Capital is confident in its portfolio investment approach and expects continued growth in NAV per share, said JR Research, author of Seeking Alpha.
The company consistently trades at a significant premium to its NAV/share due to a self-reinforcing speculative cycle, and its ability to raise equity above NAV allows it to cover losses, unlike of most BDCs, said SA contributor Bashar Issa.
Management’s capital allocation approach is exceptional in terms of risk mitigation, making a dividend yield of 6.4% safe, according to SA analyst Dair Sansyzbayev.
SA analysts and the Quant Rating system rate the stock a Buy. Meanwhile, sell-side analysts rate the stock as Hold, with an average price target of $44.50. MAIN is currently trading at ~$45.