Oaktree Specialty Lending (NASDAQ:OCSL) Releases Earnings Results, Beats Estimates By $0.02 EPS

Key Points

• Oaktree Specialty Lending reported QEPS of $0.38, beating estimates by $0.02, but revenue missed at $69.74M and net asset value fell to $15.69 (from $16.30) after ~310 bps markdowns in software loans and spread widening.
• Management reduced non-accruals to 2.6% of the debt portfolio, boosted liquidity to $671M (including a $620M undrawn facility) and cut net leverage to 1.04x, positioning the firm to deploy into new loans pricing around SOFR+500–550 with a weighted new-deal yield near 9.2%.
• The board set a new conservative base dividend of $0.30 (supplemental remains 50% of excess ANII) despite the quarter’s cash dividend of $0.34; the stock recently traded near $12.15 with a consensus target of $12.17 and a trailing yield around 13.2%.

Oaktree Specialty Lending (NASDAQ:OCSL - Get Free Report) issued its earnings results on Tuesday. The credit services provider reported $0.38 EPS for the quarter, beating analysts' consensus estimates of $0.36 by $0.02, FiscalAI reports. The business had revenue of $69.74 million during the quarter, compared to analyst estimates of $74.35 million. Oaktree Specialty Lending had a return on equity of 9.75% and a net margin of 10.58%.During the same period in the prior year, the company posted $0.45 earnings per share.

Here are the key takeaways from Oaktree Specialty Lending's conference call:

• Non-accruals declined to 2.6% of the debt portfolio (from 3.1% last quarter and 4.6% a year ago); post-quarter sales of legacy non-accruals (Dominion Diagnostics, All Web Leads) generated cash and the firm expects further reductions and redeployments into performing assets.
• Net asset value fell to $15.69 per share (from $16.30) driven mainly by ~310 bps markdowns in software loans and spread widening, which management attributes to market repricing rather than fundamental deterioration.
• liquidity was increased to $671 million (including a $620 million undrawn facility) and net leverage was reduced to 1.04x after selling some liquid positions at cost, positioning OCSL to deploy into new loans that are pricing wider (roughly SOFR+500–550) with a weighted average new-deal yield of ~9.2%.
• The board adjusted the dividend policy by setting a new conservative base dividend of $0.30 per share (supplemental dividend remains 50% of excess ANII), although the quarter’s total cash dividend declared was $0.34.

Oaktree Specialty Lending Price Performance

Oaktree Specialty Lending stock traded down $0.75 during mid-day trading on Tuesday, hitting $12.15. 941,044 shares of the company were exchanged, compared to its average volume of 907,357. The company has a quick ratio of 0.16, a current ratio of 0.16 and a debt-to-equity ratio of 0.66. The business has a fifty day moving average of $11.73 and a 200 day moving average of $12.61. Oaktree Specialty Lending has a 1-year low of $10.63 and a 1-year high of $14.77. The company has a market capitalization of $1.07 billion, a PE ratio of 33.61 and a beta of 0.52.

Oaktree Specialty Lending Dividend Announcement

The business also recently disclosed a quarterly dividend, which was paid on Tuesday, March 31st. Shareholders of record on Monday, March 16th were paid a dividend of $0.40 per share. This represents a $1.60 annualized dividend and a yield of 13.2%. The ex-dividend date was Monday, March 16th. Oaktree Specialty Lending's dividend payout ratio is currently 444.44%.

Insider Transactions at Oaktree Specialty Lending

In related news, Director Phyllis R. Caldwell acquired 2,500 shares of the company's stock in a transaction on Monday, March 16th. The stock was purchased at an average cost of $10.77 per share, for a total transaction of $26,925.00. Following the completion of the purchase, the director directly owned 23,500 shares of the company's stock, valued at $253,095. The trade was a 11.90% increase in their position. The transaction was disclosed in a document filed with the Securities & Exchange Commission, which is available through this hyperlink. 0.29% of the stock is owned by corporate insiders.

Institutional Inflows and Outflows

Hedge funds have recently bought and sold shares of the stock. UBS Group AG increased its stake in shares of Oaktree Specialty Lending by 7.4% in the third quarter. UBS Group AG now owns 904,340 shares of the credit services provider's stock valued at $11,802,000 after buying an additional 62,158 shares in the last quarter. Invesco Ltd. lifted its position in Oaktree Specialty Lending by 25.6% during the 3rd quarter. Invesco Ltd. now owns 886,847 shares of the credit services provider's stock worth $11,573,000 after buying an additional 181,023 shares in the last quarter. Balyasny Asset Management L.P. lifted its position in Oaktree Specialty Lending by 298.9% during the 2nd quarter. Balyasny Asset Management L.P. now owns 626,324 shares of the credit services provider's stock worth $8,556,000 after buying an additional 469,328 shares in the last quarter. Royal Bank of Canada lifted its position in Oaktree Specialty Lending by 34.3% during the 1st quarter. Royal Bank of Canada now owns 468,879 shares of the credit services provider's stock worth $7,201,000 after buying an additional 119,775 shares in the last quarter. Finally, Two Sigma Investments LP lifted its position in Oaktree Specialty Lending by 221.2% during the 3rd quarter. Two Sigma Investments LP now owns 388,157 shares of the credit services provider's stock worth $5,065,000 after buying an additional 267,318 shares in the last quarter. 36.79% of the stock is currently owned by institutional investors and hedge funds.

Analyst Upgrades and Downgrades

OCSL has been the subject of a number of recent research reports. Wells Fargo & Company cut their target price on Oaktree Specialty Lending from $13.00 to $12.00 and set an "equal weight" rating for the company in a research note on Thursday, February 5th. Zacks Research upgraded Oaktree Specialty Lending from a "strong sell" rating to a "hold" rating in a research note on Monday, April 6th. JPMorgan Chase & Co. cut their target price on Oaktree Specialty Lending from $13.50 to $10.50 and set a "neutral" rating for the company in a research note on Friday, March 13th. Weiss Ratings upgraded Oaktree Specialty Lending from a "sell (d+)" rating to a "hold (c-)" rating in a research note on Wednesday, April 15th. Finally, Wall Street Zen upgraded Oaktree Specialty Lending from a "sell" rating to a "hold" rating in a research note on Saturday, April 11th. Six equities research analysts have rated the stock with a Hold rating, According to MarketBeat.com, the stock presently has an average rating of "Hold" and a consensus target price of $12.17.

About Oaktree Specialty Lending

Oaktree Specialty Lending Corporation NASDAQ: OCSL is a closed-end, externally managed specialty finance company structured as a business development company (BDC). Launched in 2014, Oaktree Specialty Lending provides customized debt solutions to U.S. middle-market companies, with a focus on senior secured loans, second-lien financings, mezzanine debt and select equity co-investments. The company’s investment strategy centers on floating-rate instruments designed to offer downside protection and income potential in varying interest rate environments.

The firm’s portfolio spans a diverse array of industries, including healthcare, technology, energy, business services and consumer products.

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