Implied Volatility Surging for Blue Owl Capital (OBDC) Stock Options

Blue Owl Capital Corporation OBDC reported third-quarter 2024 earnings per share (EPS) of 47 cents, which missed the Zacks Consensus Estimate by a penny. The bottom line declined by 2 cents from a year ago.

The total investment income of Blue Owl Capital amounted to $406.03 million, which increased 1.8% year over year. Also, the top line beat the Zacks Consensus Estimate by 1.6%.

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Blue Owl Capital’s weak third-quarter earnings were due to higher expenses and lower interest income from non-controlled, non-affiliated investments. The negatives were partially offset by higher investment income from controlled, affiliated investments.

Blue Owl Capital Corporation Price, Consensus and EPS Surprise

Blue Owl Capital Corporation price-consensus-eps-surprise-chart | Blue Owl Capital Corporation Quote

OBDC’s Q3 Update

Net investment income decreased 2.7% year over year to $184.9 million. Also, the metric missed our estimate of $188.9 million. Total new investment commitments (net of sell-downs) were $1.2 billion across 23 new portfolio companies and 14 existing ones.

Blue Owl Capital ended the third quarter with investments in 219 portfolio companies, backed with an aggregate fair value of $13.4 billion. Based on the fair value, the average investment size in each portfolio company was $61.4 million as of Sept. 30, 2024.

Total expenses increased 5.5% from the year-ago period to $217.6 million in the third quarter. The metric was higher than our estimate of $208.9 million, primarily due to higher interest expenses, management fees and other G&A expenses.

The company recorded a net income of $135.4 million in the third quarter compared with $206.9 million in the year-ago period.

Financial Update (as of Sept. 30, 2024)

Blue Owl Capital exited the third quarter with a cash balance of $481.3 million, which declined from $658.7 million as of Dec. 31, 2023. Total assets of $14.09 billion rose from $13.51 billion at 2023-end.

Debt was $7.74 billion, up from $7.08 billion at 2023-end. Blue Owl Capital had $1.6 billion of undrawn capacity under its credit facilities. At the third-quarter end, net debt to equity was 1.23X.

Net cash used in operating activities in the first nine months of 2024 was $285.74 million against the prior-year operating cash flow figure of $721.75 million.

Dividend & Repurchase Update

The board of directors at Blue Owl Capital declared a fourth-quarter 2024 dividend of 37 cents per share, to be paid on or before Jan. 15, 2025, to shareholders of record as of Dec. 31, 2024. It also provided a third-quarter 2024 supplemental dividend of 5 cents per share.

Blue Owl Capital’s board earlier approved a new share repurchase plan for 2024, under which the company may purchase shares up to $150 million. It did not make share repurchases under this program in the third quarter.

Zacks Rank & Key Picks

OBDC currently has a Zacks Rank #4 (Sell).

Investors interested in the broader Finance space may look at some better-ranked players like Jackson Financial Inc. JXN, WisdomTree, Inc. WT and Globe Life Inc. GL, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Jackson Financial’s current-year earnings is pegged at $18.79 per share, which indicates 46.3% year-over-year growth. It witnessed one upward estimate revision in the past 30 days against no downward movement. The consensus mark for JXN’s current year revenues suggests a 117.5% surge from a year ago.

The Zacks Consensus Estimate for WisdomTree’s 2024 earnings indicates 75.7% year-over-year growth. During the past month, WT has witnessed three upward estimate revisions against none in the opposite direction. It beat earnings estimates thrice in the past four quarters and met once, with an average surprise of 7.3%.

The Zacks Consensus Estimate for Globe Life’s current-year earnings suggests a 15.1% year-over-year increase. During the past month, GLhas witnessed five upward estimate revisions against none in the opposite direction. The consensus mark for current-year revenues is pegged at $5.8 billion, a 5.6% increase from a year ago.

Zacks Investment Research

For the quarter ended September 2024, Blue Owl Capital Corporation (OBDC) reported revenue of $406.03 million, up 1.8% over the same period last year. EPS came in at $0.47, compared to $0.49 in the year-ago quarter.

The reported revenue compares to the Zacks Consensus Estimate of $399.85 million, representing a surprise of +1.55%. The company delivered an EPS surprise of -2.08%, with the consensus EPS estimate being $0.48.

While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determine their next move, some key metrics always offer a more accurate picture of a company's financial health.

Since these metrics play a crucial role in driving the top- and bottom-line numbers, comparing them with the year-ago numbers and what analysts estimated about them helps investors better project a stock's price performance.

Here is how Blue Owl Capital Corporation performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts:

• Investment income from non-controlled, non-affiliated investments- Interest income: $299.60 million versus the two-analyst average estimate of $292.83 million.
• Investment income from non-controlled, non-affiliated investments- Other income: $5.33 million versus the two-analyst average estimate of $4.53 million.
• Investment income from controlled, affiliated investments- Dividend income: $29.63 million versus $25.02 million estimated by two analysts on average.
• Investment income from non-controlled, non-affiliated investments- Payment-in-kind interest income: $45.56 million compared to the $45.97 million average estimate based on two analysts.
• Investment income from non-controlled, non-affiliated investments- Dividend income: $17.12 million compared to the $16.63 million average estimate based on two analysts.
• Investment income from controlled, affiliated investments- Interest income: $7.59 million versus the two-analyst average estimate of $7.31 million.
• Investment income from controlled, affiliated investments- Other Income: $0.18 million versus the two-analyst average estimate of $0.19 million.

View all Key Company Metrics for Blue Owl Capital Corporation here>>>

Shares of Blue Owl Capital Corporation have returned -1.3% over the past month versus the Zacks S&P 500 composite's +0.7% change. The stock currently has a Zacks Rank #4 (Sell), indicating that it could underperform the broader market in the near term.

Zacks Investment Research

Blue Owl Capital Corporation (OBDC) came out with quarterly earnings of $0.47 per share, missing the Zacks Consensus Estimate of $0.48 per share. This compares to earnings of $0.49 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of -2.08%. A quarter ago, it was expected that this company would post earnings of $0.47 per share when it actually produced earnings of $0.48, delivering a surprise of 2.13%.

Over the last four quarters, the company has surpassed consensus EPS estimates two times.

Blue Owl Capital Corporation, which belongs to the Zacks Financial - Miscellaneous Services industry, posted revenues of $406.03 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 1.55%. This compares to year-ago revenues of $399.02 million. The company has topped consensus revenue estimates four times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Blue Owl Capital Corporation shares have lost about 0.7% since the beginning of the year versus the S&P 500's gain of 21.2%.

What's Next for Blue Owl Capital Corporation?

While Blue Owl Capital Corporation has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Blue Owl Capital Corporation: unfavorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.47 on $396.22 million in revenues for the coming quarter and $1.91 on $1.59 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Financial - Miscellaneous Services is currently in the top 29% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Oaktree Specialty Lending (OCSL), another stock in the same industry, has yet to report results for the quarter ended September 2024. The results are expected to be released on November 19.

This specialty finance company is expected to post quarterly earnings of $0.56 per share in its upcoming report, which represents a year-over-year change of -9.7%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

Oaktree Specialty Lending's revenues are expected to be $98.09 million, down 3.8% from the year-ago quarter.

Zacks Investment Research