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Newtek (NEWT) Q3 Earnings Beat on Higher Investment Income

Zacks Equity Research

Newtek Business Services Corp.’s NEWT third-quarter 2019 adjusted net investment income of 63 cents per share outpaced the Zacks Consensus Estimate of 57 cents. The bottom-line figure also jumped 26% year on year.

Results benefited from higher total investment income and improved investment portfolio. However, rise in total expenses acted as a headwind.

Including certain one-time items, net investment loss was $0.53 million or 3 cents per share, improving from a loss of $1.4 million or 8 cents per share reported in the prior-year quarter.

Total Investment Income Improves, Expenses Rise

Total investment income was $16 million, up 29.4% from the year-ago quarter. This upside was mainly driven by a higher interest, dividend and servicing income. In addition, the top line beat the Zacks Consensus Estimate of $13.7 million.

Total expenses flared up 20.3% year over year to $16.6 million. The increase mainly resulted from higher interest expenses, professional fees, other general and administrative costs, along with origination and servicing-related party costs.

Lending Activities

In the third quarter, Newtek Small Business Finance, LLC (NSBF) funded SBA 7(a) loans worth $114.3 million, down 6.6% year over year.

Full-year 2019 SBA 7(a) loan funding is expected to be $520 million, up 10.8% year over year.

Balance Sheet Position

As of Sep 30, 2019, Newtek’s net asset value was $15.41 per share compared with $15.91 as on Dec 31, 2018.

The company’s total investment portfolio went up 12.9% to $610.9 million as of Sep 30, 2019, from $541.1 million as of Dec 31, 2018.

At the end of the third quarter, debt-to-equity ratio was 133%.

Our Take

Newtek’s investment portfolio continues to be on track. However, elevated expense levels might hurt the bottom line to some extent.

Newtek Business Services Corp. Price, Consensus and EPS Surprise

Newtek Business Services Corp. Price, Consensus and EPS Surprise

Newtek Business Services Corp. price-consensus-eps-surprise-chart | Newtek Business Services Corp. Quote

Currently, Newtek carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance & Earnings Release Dates of Other Finance Stocks

Ares Capital Corporation’s ARCC third-quarter 2019 core earnings of 48 cents per share surpassed the Zacks Consensus Estimate of 46 cents. Also, the bottom line rose 6.7% from the year-ago quarter.

Hercules Capital Inc.’s HTGC third-quarter 2019 net investment income of 37 cents per share outpaced the Zacks Consensus Estimate of 34 cents. The bottom line grew 19.4% from the year-ago figure.

OFS Capital Corporation OFS is scheduled to announce results on Nov 8.

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