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Mildly Bad News From PSEC Just Keeps On Coming

May 06, 2015 11:20 PM ETPSEC
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PSEC Reports NII of $0.2440 compared to a Div of $0.28 paid in the quarter - forward dividend is $0.249/share

What They Earned Prospect Capital Corporation (PSEC) reported for Q1-15 Total investment income of $191.350 million [$0.5338/share]; Net investment income of $87.449 million [$0.2440/share]; and a Net Increase in Net Assets Resulting from Operations of $81.492 million [$0.2273/share]. PSEC's net asset value per share was $10.30 compared $10.35 last quarter.

For context, here is the last six quarter's of data:

Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13

Total investment income 191.350 198.883 202.012 182.840 190.327 178.090
Net investment income 87.449 91.325 94.463 84.148 98.523 92.215
Investments @ fair value 6.603 6.524 6.253 6.254 6.006 4.886
Wt Av Share Count 358.449 354.100 343.359 342.627 333.500 287.016
TII/share $0.5338 $0.5615 $0.5796 $0.5336 $0.5707 $0.6205
NII/share $0.2440 $0.2579 $0.2710 $0.2456 $0.2954 $0.3213
NAV/share $10.30 $10.35 $10.47 $10.56 $10.68 $10.73
Wt Av Yield 12.4% 12.3% 11.9% 12.1% 12.5% 12.9%

The NII at $0.2440/share was well below forecast and below the trend - unless the trend if 'falling NII"

Earnings Est Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
Jun 15
Next Year
Jun 16
Avg. Estimate 0.26 0.27 1.06 1.08
No. of Analysts 9.00 9.00 9.00 8.00
Low Estimate 0.25 0.26 1.04 1.04
High Estimate 0.28 0.28 1.10 1.10
Year Ago EPS 0.31 0.25 1.19 1.06

Even the TII (total investment income) or revenue at $191 million was below expectations

Revenue Est Current Qtr.
Mar 15
Next Qtr.
Jun 15
Current Year
Jun 15
Next Year
Jun 16
Avg. Estimate 201.51M 207.20M 808.28M 869.63M
No. of Analysts 5 5 7 6
Low Estimate 198.30M 200.86M 791.24M 814.90M
High Estimate 206.90M 215.60M 823.40M 970.20M
Year Ago Sales 190.33M 182.84M 712.29M 808.28M
Sales Growth (year/est) 5.90% 13.30% 13.50% 7.60%

The trend in earnings disappointments is now 4 out of the last five. Here is how Yahoo recounts the prior four:

Earnings History Mar 14 Jun 14 Sep 14 Dec 14
EPS Est 0.32 0.32 0.28 0.27
EPS Actual 0.31 0.25 0.28 0.26
Difference -0.01 -0.07 0.00 -0.01
Surprise % -3.10% -21.90% 0.00% -3.70%

The good news - PSEC has one of the lowest price/NAVs and price to earnings ratios in the sector. As bad as the earnings news was - it was (IMHO) priced for an even worse performance. So the share price should - logically - go up on this bad (but not really bad) earnings news.

Analyst's Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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