Ares Capital Q4 Earnings Miss as Expenses Increase Y/Y, Stock Down

Core Insights - Ares Capital Corporation (ARCC) reported lower-than-expected fourth-quarter 2024 core earnings of 55 cents per share, missing the Zacks Consensus Estimate of 58 cents, reflecting a 12.7% decline from the prior-year quarter [1][2] - Total investment income for the fourth quarter was $759 million, up 7.4% year over year, but below the Zacks Consensus Estimate of $785 million [4] - Total expenses increased to $387 million, a rise of 9.6% year over year, impacting overall profitability [5] Financial Performance - For the full year 2024, core earnings were $2.33 per share, missing the Zacks Consensus Estimate of $2.36, and reflecting a 1.7% decline from 2023 [3] - GAAP net income for the fourth quarter was $357 million, down from $413 million in the prior-year quarter [2] - Full-year total investment income reached $2.99 billion, up 14.4% year over year, but also lagged the Zacks Consensus Estimate of $3.02 billion [4] Portfolio Activities - In the fourth quarter, ARCC made gross commitments of $3.75 billion to new and existing portfolio companies, significantly higher than $2.38 billion in the prior-year quarter [6] - The company exited $2.72 billion of commitments compared to $1.43 billion a year ago [6] - The fair value of ARCC's portfolio investments was $26.7 billion as of December 31, 2024 [6] Balance Sheet Strength - As of December 31, 2024, cash and cash equivalents totaled $635 million, an increase from $535 million a year earlier [8] - The company had $5.1 billion available for additional borrowings under existing credit facilities, with total outstanding debt at $13.8 billion [8] - Total assets were $28.3 billion, and stockholders' equity was $13.4 billion, with a net asset value of $19.89 per share, up from $19.24 a year prior [8] Future Outlook - The demand for customized financing is expected to drive growth in total investment income in the upcoming quarters [9] - Increased investment commitments are likely to support the company's financials, although expansion strategies may lead to rising costs [9] - Regulatory constraints are identified as a significant headwind for the company [9]