As the craze of earnings season draws to a close, here’s a look back at some of the most exciting (and some less so) results from Q2. Today, we are looking at specialty finance stocks, starting with Hercules Capital (NYSE: HTGC).
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 4.5%.
In light of this news, share prices of the companies have held steady as they are up 3.5% on average since the latest earnings results.
Hercules Capital (NYSE: HTGC)
Named after the mythological hero known for his strength, Hercules Capital (NYSE: HTGC) is a business development company that provides debt financing to venture capital-backed and growth-stage technology and life sciences companies.
Hercules Capital reported revenues of $137.5 million, up 10% year on year. This print exceeded analysts’ expectations by 6.3%. Overall, it was a very strong quarter for the company with a beat of analysts’ EPS estimates.
The market was likely pricing in the results, and the stock is flat since reporting. It currently trades at $18.90.
Is now the time to buy Hercules Capital? Access our full analysis of the earnings results here, it’s free.
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 EBITDA 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 16.2% since reporting. It currently trades at $43.50.
Is now the time to buy Encore Capital Group? Access our full analysis of the earnings results here, it’s free.
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, falling short of analysts’ expectations by 4.6%. It was a disappointing quarter as it posted a significant miss of analysts’ AUM estimates.
As expected, the stock is down 3.3% since the results and currently trades at $13.06.
Read our full analysis of Oaktree Specialty Lending’s results here.
PROG (NYSE: PRG)
Evolving from its origins as Aaron's, Inc. before rebranding in 2020, PROG Holdings (NYSE: PRG) provides alternative payment solutions including lease-to-own options and second-look credit products for consumers who may not qualify for traditional financing.
PROG reported revenues of $604.7 million, up 2.1% year on year. This result surpassed analysts’ expectations by 2.6%. Overall, it was an exceptional quarter as it also logged a beat of analysts’ EPS estimates and an impressive beat of analysts’ EBITDA estimates.
The stock is up 14.8% since reporting and currently trades at $32.86.
Read our full, actionable report on PROG here, it’s free.
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. This print missed analysts’ expectations by 1.6%. All in all, it was a slower quarter for the company.
The stock is down 3.9% since reporting and currently trades at $9.90.
Read our full, actionable report on New Mountain Finance here, it’s free.
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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