Yahoo Finance Blue Owl Capital Corporation (OBDC) Up 1.4% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Blue Owl Capital Corporation (OBDC). Shares have added about 1.4% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Blue Owl Capital Corporation due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Blue Owl Capital Q1 Earnings Miss on High Expenses
Blue Owl Capital reported first-quarter 2024 earnings per share (EPS) of 47 cents, which missed the Zacks Consensus Estimate by 2.1%. However, the bottom line improved 4.4% year over year.
The total investment income of Blue Owl Capital amounted to $400 million, which increased 5.8% year over year. The top line beat the Zacks Consensus Estimate of $399 million.
Blue Owl Capital’s first-quarter earnings were impacted by higher interest expenses as a result of higher average rates. The ratio of total expenses to average net assets deteriorated 90 basis points year over year to 14.4% in the first quarter of 2024. However, strong credit performance, rising net investment income and new investment commitments partially offset the negatives.
Q1 Update
Net investment income increased 2.8% year over year to $182.8 million. However, the metric missed our estimate of $187.1 million.
Total new investment commitments (net of sell downs) were $1.2 billion across 18 new portfolio companies and 13 existing ones. The metric rose more than five-fold year over year in the quarter under review.
Blue Owl Capital ended the first quarter with investments in 198 portfolio companies, backed with an aggregate fair value of $12.4 billion. Based on the fair value, the average investment size in each portfolio company was $62.7 million as of Mar 31, 2024.
Total expenses escalated 7.7% year over year to $211.6 million in the first quarter. The metric was higher than our estimate of $206 million, primarily due to higher interest expenses and performance-based incentive fees.
The company recorded a net income of $182.5 million in the first quarter compared with $201.8 million in the year-ago period.
Financial Update (as of Mar 31, 2024)
Blue Owl Capital exited the first quarter with cash and restricted cash of $666.7 million, which improved from $658.7 million as of Dec 31, 2023. Total assets of $13.3 billion fell from $13.5 billion at 2023-end.
Debt was $6.9 billion, down from $7.1 billion at 2023-end. Blue Owl Capital had $1.7 billion of undrawn capacity under its credit facilities.
Net cash from operating activities in the first quarter of 2024 was $444.2 million compared with the prior-year figure of $46.3 million.
At the first-quarter end, net debt to equity was 1.04X compared with 1.21x in the year-ago quarter.
Dividend & Repurchase Update
The board of directors at Blue Owl Capital declared a second-quarter 2024 dividend of 37 cents per share, to be paid on or before Jul 15, 2024, to shareholders of record as of Jun 28. It also provided a first-quarter 2024 supplemental dividend of 5 cents per share.
Blue Owl Capital’s board approved a new share repurchase plan for 2024, under which the company may purchase shares up to $150 million. The company did not make share repurchases under this program in the first quarter, leaving it with a remaining fund of $150 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Blue Owl Capital Corporation has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Blue Owl Capital Corporation has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Blue Owl Capital Corporation is part of the Zacks Financial - Miscellaneous Services industry. Over the past month, Moody's (MCO), a stock from the same industry, has gained 1.3%. The company reported its results for the quarter ended March 2024 more than a month ago.
Moody's reported revenues of $1.79 billion in the last reported quarter, representing a year-over-year change of +21.5%. EPS of $3.37 for the same period compares with $2.99 a year ago.
For the current quarter, Moody's is expected to post earnings of $2.70 per share, indicating a change of +17.4% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Moody's. Also, the stock has a VGM Score of C.
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