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FS KKR Capital (FSK) Q3 Earnings Beat Despite Higher Expenses

FS KKR Capital Corp.’s FSK third-quarter 2021 adjusted net investment income (NII) per share of 64 cents surpassed the Zacks Consensus Estimate by a penny. In the prior-year quarter, the company reported earnings of 63 cents. The reported quarter’s results exclude accretion resulting from the merger with FS KKR Capital Corp. II completed in June.

Results were aided by a substantial rise in total investment income. Also, portfolio activity was decent in the quarter. However, higher expenses hurt results to some extent.

NII (GAAP basis) was $201 million, up significantly from $78 million in the prior-year quarter.

Total Investment Income & Expenses Rise Significantly

Total investment income was $360 million, up significantly from $147 million recorded in the year-ago quarter. The top line surpassed the Zacks Consensus Estimate of $335.7 million.

Total operating expenses increased significantly from $69 million to $174 million. All cost components witnessed a rise. Moreover, the company recorded a subordinated income incentive fee of $35 million in the reported quarter.

Total Portfolio Value & Balance Sheet Decent

The fair value of FS KKR Capital’s total investment portfolio was $15.8 billion as of Sep 30, 2021.

As of Sep 30, 2021, the company’s net asset value was $27.14 per share compared with $25.02 as of Dec 31, 2020.

The company had $16.6 billion in total assets and $7.7 billion in total stockholders’ equity at the end of the third quarter.

Our Take

Decent origination volumes are expected to support FS KKR Capital’s profitability. However, a tough operating backdrop creates a headwind.

FS KKR Capital Corp. Price, Consensus and EPS Surprise


FS KKR Capital Corp. price-consensus-eps-surprise-chart | FS KKR Capital Corp. Quote

Currently, FS KKR Capital carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Finance Companies

Credit Acceptance Corporation’s CACC third-quarter 2021 earnings of $15.79 per share comfortably surpassed the Zacks Consensus Estimate of $11.95. The bottom line also reflects a 16.4% increase from the prior-year quarter. The figures include certain non-recurring items.

Ares Capital Corporation’s ARCC third-quarter 2021 core earnings of 47 cents per share beat the Zacks Consensus Estimate of 45 cents. The bottom line reflected a rise of 20.5% from the prior-year quarter.

Hercules Capital Inc.’s HTGC third-quarter 2021 net investment income of 33 cents per share beat the Zacks Consensus Estimate by a penny. The bottom line was 2.9% down from the year-ago quarter figure.

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