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What's in the Cards for Main Street (MAIN) in Q2 Earnings?

Main Street Capital Corporation MAIN is slated to announc results on Aug 3, after market close. The company’s net investment income per share and total investment income are expected to have increased year over year.

In the first quarter of 2023, net investment income per share matched the consensus estimate of $1.02. Also, this reflected a rise of 39.7% from the year-ago quarter. Further, total investment income increased 51.5% to $120.3 million.

Over the trailing four quarters, Main Street’s earnings surpassed the consensus estimate in three occasions and matched once, the average surprise being 7.29%.

Main Street Capital Corporation Price and EPS Surprise

 

Main Street Capital Corporation Price and EPS Surprise
Main Street Capital Corporation Price and EPS Surprise

Main Street Capital Corporation price-eps-surprise | Main Street Capital Corporation Quote

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The Zacks Consensus Estimate for Main Street’s net investment income of 99 cents per share for the to-be-reported quarter increased 2.1% over the past 60 days. Further, it indicates a rise of 32% from the prior quarter’s reported figure. Managements’preliminary estimate for the metric is in the range of $1.05-$1.07 per share.

The consensus estimate of $120 million for total investment income suggests a 40.9% gain from the prior-year quarter’s reported number.

Key Factors to Note

Main Street originated $176.4 million in new or increased commitments in its private loan portfolio during the second quarter. These investments were funded with a cost basis of $147.5 million. As of Jun 30, 2023, its private loan portfolio included total investments at cost of around $1.5 billion. Hence, new and increased private loan commitments and investments during the second quarter of 2023 are anticipated to have aided the company’s top-line growth.

The Federal Reserve hiked rates by 25 basis points in the to-be-reported. With this, the policy rate now stands at a 15-year high of 5-5.25%. This is likely to have supported interest income for Main Street during the quarter.

The Zacks Consensus Estimate for interest, fee and dividend income from control investments is pegged at $48 million, implying a rise of 30.3% from the prior-year quarter.

The consensus estimate for interest, fee and dividend income from affiliate investments is pegged at $17.1 million, indicating a 43.6% jump from the year-ago quarter.

The Zacks Consensus Estimate for interest, fee and dividend income from non-control and non-affiliate investments is pegged at $54 million, hinting at a climb of 47.9% from the year-earlier quarter.

Further, per management, net unrealized appreciation and net impact of realizations from Main Street’s portfolio investments have led to a net increase in fair value of the company’s investment portfolio. This has increased net asset value (NAV) per share during the quarter.

Management estimates NAV per share as of June 30, 2023, to be between $27.66 and $27.72. This suggests a sequential increase of 1.6%-1.8%.

Further, given these preliminary results, management estimates to generate quarterly annualized return on equity of 18-20% in the quarter.

However, Main Street has been witnessing a rise in total expenses for the past several quarters. Additionally, amid rising inflation, compensation expenses are anticipated to have led to elevated total expenditures, hindering bottom-line growth during the quarter under review.

Earnings Whisper

The proven Zacks model does not conclusively predict an earnings beat for Main Street this time around. This is because Main Street does not have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Main Street is 0.00%.

Zacks Rank: Main Street carries a Zacks Rank #2 (Buy).

Stocks That Warrant a Look

Runway Growth Finance Corp. RWAY and Forge Global Holdings, Inc. FRGE are a couple of stocks that you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases.

The Earnings ESP for RWAY is +2.22% and currently carries a Zacks Rank #2. It is slated to report second-quarter 2023 results on Aug 8. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for RWAY’s second-quarter earnings has moved 1% north over the past week.

FRGE currently has an Earnings ESP of +11.11% and a Zacks Rank #3. It is scheduled to release second-quarter 2023 results on Aug 8.

The Zacks Consensus Estimate for FRGE’s second-quarter earnings has remained unchanged over the past 60 days.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Main Street Capital Corporation (MAIN) : Free Stock Analysis Report

Runway Growth Finance Corp. (RWAY) : Free Stock Analysis Report

Forge Global Holdings, Inc. (FRGE) : Free Stock Analysis Report

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Zacks Investment Research