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On Thursday, Keefe, Bruyette & Woods maintained their Market Perform rating on Stellus Capital (NYSE:SCM) with a steady price target of $13.50. The firm’s analysis follows Stellus Capital’s earnings report released on March 4, which showed that net investment income (NII) fell short of expectations, despite an increase in portfolio originations.
The company’s net asset value (NAV) dropped by 0.6%, primarily due to earnings that were below the dividend payout. Additionally, the percentage of non-accruals in the portfolio rose to 8%, signaling potential concerns about asset quality and repayment. Still, InvestingPro analysis shows the company maintains strong financial health with a current ratio of 1.57, indicating sufficient liquidity to meet short-term obligations.
Keefe, Bruyette & Woods noted that their earnings forecasts for Stellus Capital are below the company’s dividend, indicating a cautious stance on the investment management firm’s ability to maintain its dividend payouts. Nonetheless, the analysts acknowledged that Stellus Capital has $1.64 of spillover income, which could provide some cushion.
In light of these factors, Keefe, Bruyette & Woods have slightly reduced their earnings estimates for Stellus Capital. The firm’s commentary underscores the challenges faced by Stellus Capital in terms of earnings performance and asset quality, while also pointing to the existing spillover income as a positive aspect.
In other recent news, Stellus Capital Investment Corporation reported its fourth-quarter 2024 earnings, revealing a slight miss in both earnings per share (EPS) and revenue compared to analyst forecasts. The company’s EPS stood at $0.37, falling short of the anticipated $0.3957, while revenue reached $25.61 million, below the expected $26.54 million. Despite these setbacks, Stellus Capital achieved a significant milestone by reaching a $1 billion investment portfolio for the first time. The company also declared a first-quarter 2025 dividend of $0.40 per share, maintaining its focus on dividend payouts. Meanwhile, Stellus Capital is pursuing a third SBA (LON:SBA) lending license, showcasing its strategic growth initiatives. Concerns over tariff impacts and market yield compression were noted as potential challenges for the company. Analysts from firms such as Raymond (NSE:RYMD) James and Ladenburg Thalmann have been engaging with the company’s management to discuss these developments. These recent updates highlight Stellus Capital’s ongoing efforts to navigate a complex economic landscape while maintaining its growth trajectory.
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