Is Ares Capital Stock Worth Owning Ahead of Q4 Earnings?

Ares Capital Corporation ARCC is scheduled to announce fourth-quarter and 2025 results on Feb. 4, before market close. Similar to the previous reported quarter, the company is expected to have recorded an improvement in total investment income in the to-be-reported quarter, driven by a continued rise in the demand for customized financing.

The Zacks Consensus Estimate for ARCC’s fourth-quarter revenues is pegged at $3.06 billion, which indicates year-over-year growth of 2.3%. The consensus estimate for full-year sales of $3.20 billion implies a rise of 4.7% from the previous year’s actual.

In the past seven days, the consensus estimate for earnings for the to-be-reported quarter has been unchanged at 50 cents. The estimate indicates a 9.1% decline from the prior-year quarter’s actual.

For 2025, the consensus estimate for earnings is $2.00, which indicates a year-over-year decline of 14.2%.

Estimate Revision Trend

ARCC does not have a decent or impressive earnings surprise history. The company’s earnings lagged the Zacks Consensus Estimate in three of the trailing four quarters.

Earnings Surprise History

Other Key Q4 Estimates for Ares Capital

The Zacks Consensus Estimate for the company’s interest income from investments (constituting a significant portion of total investment income) is pegged at $571 million, indicating a 5.4% rise from the prior-year quarter. 

The consensus mark for other income is pegged at $17.85 million, indicating an 11.6% rise. 

The consensus estimate for capital structuring service fees is pegged at $51 million, implying 6.3% year-over-year growth. The Zacks Consensus Estimate for dividend income of $152 million suggests a marginal decline from the prior-year quarter’s actual. 

Ares Capital has been witnessing higher expenses over the past several quarters. As the company has been investing in venture growth stage companies, operating costs are expected to have been elevated in the fourth quarter.

What Our Quantitative Model Unveils for ARCC

According to our quantitative model, the chances of Ares Capital beating the Zacks Consensus Estimate for earnings this time cannot be conclusively predicted. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.

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

Earnings ESP: The Earnings ESP for Ares Capital is 0.00%.

Zacks Rank: The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ares Capital’s Price Performance & Valuation Analysis

In the fourth quarter, the ARCC stock gained only 0.5% against the industry’s 0.6% decline. Its peers Amalgamated Financial Corp. AMAL and Hercules Capital, Inc. HTGC rallied 19.2% and 1.1%, respectively.

4Q25 Price Performance

Amalgamated Financial’s fourth-quarter 2025 core earnings of 99 cents surpassed the Zacks Consensus Estimate of 91 cents per share. The bottom line increased 10% from the prior-year quarter. Results were aided by an increase in revenues. However, a rise in expenses hurt Amalgamated Financial’s results to some extent.

Hercules Capital is scheduled to report fourth-quarter 2025 results on Feb. 12. The company’s quarterly earnings are pegged at 48 cents, which has been unchanged in the past seven days. The estimated figure implies a year-over-year decline of 2% for Hercules Capital.

ARCC shares appear expensive relative to the industry. The stock is, at present, trading at a price-to-book ratio (P/B) of 0.99X, which is higher than the industry's 0.86X. This means that investors may pay a higher price than the company's expected earnings growth.

P/B Ratio

Evaluating Ares Capital Stock Ahead of Q4 Earnings

ARCC remains well-positioned for growth, given the demand for customized financing and a diversified investment portfolio. A decent liquidity position is another tailwind for the company.

However, the company’s recent price performance has not been great. The primary reason behind this has been the interest rate cuts. Business development companies are sensitive to yield compression, which is the narrowing gap between what they earn on floating-rate loans and what they pay on borrowed funds. Because the Federal Reserve reduced rates in 2025, with expectations of more in the near term, the spread on ARCC’s investment portfolio has come under pressure, which weighed on investor sentiment.

Moreover, higher expenses (the company’s expenses saw a CAGR of 16.6% over the five years ended 2024, with the upward trend continuing in the first nine months of 2025) and cautious forecasts for deal flow amid economic uncertainty have put downward pressure on the stock.

Thus, despite strength in fundamentals, investors should watch out for the above-mentioned concerns and monitor how Ares Capital navigates the current operating backdrop and generates solid investment income before investing in the stock right now. However, those who already own the stock can hold on to it for robust long-term gains.

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This article originally published on Zacks Investment Research (zacks.com).

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