The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how PROG (NYSE: PRG) and the rest of the specialty finance stocks fared in Q2.
Specialty finance companies provide targeted lending or financial services for specific industries or needs. They benefit from expertise in particular sectors, often reduced competition in specialized niches, and tailored underwriting that can yield higher margins. Challenges include concentration risk in specific industries, difficulty achieving scale efficiencies, and potential vulnerability during sector-specific downturns affecting their specialized markets.
The 12 specialty finance stocks we track reported a satisfactory Q2. As a group, revenues missed analysts’ consensus estimates by 3.8%.
In light of this news, share prices of the companies have held steady as they are up 2.4% on average since the latest earnings results.
PROG (NYSE: PRG)
Evolving from its origins as Aaron's, Inc. before rebranding in 2020, PROG Holdings (NYSE: PRG) provides alternative payment solutions including lease-to-own options and second-look credit products for consumers who may not qualify for traditional financing.
PROG reported revenues of $604.7 million, up 2.1% year on year. This print exceeded analysts’ expectations by 2.6%. Overall, it was an exceptional quarter for the company with a beat of analysts’ EPS and EBITDA estimates.
"Our second quarter results once again demonstrate the resiliency of our Leasing business and our ability to manage through a period of high uncertainty and the loss of an important retail partner to liquidation," said Steve Michaels, President and CEO of PROG Holdings.
Interestingly, the stock is up 10.9% since reporting and currently trades at $31.75.
Is now the time to buy PROG? Access our full analysis of the earnings results here, it’s free for active Edge members.
Best Q2: Encore Capital Group (NASDAQ: ECPG)
Operating in the often misunderstood world of debt collection since 1999, Encore Capital Group (NASDAQ: ECPG) purchases portfolios of defaulted consumer debt at deep discounts and works with individuals to recover these obligations while helping them toward financial recovery.
Encore Capital Group reported revenues of $442.1 million, up 24.4% year on year, outperforming analysts’ expectations by 15.3%. The business had an incredible quarter with a beat of analysts’ EPS and revenue estimates.
Encore Capital Group scored the fastest revenue growth among its peers. The market seems happy with the results as the stock is up 19% since reporting. It currently trades at $44.55.
Is now the time to buy Encore Capital Group? Access our full analysis of the earnings results here, it’s free for active Edge members.
Weakest Q2: Oaktree Specialty Lending (NASDAQ: OCSL)
Managed by Oaktree Capital Management, one of the world's premier alternative investment firms, Oaktree Specialty Lending (NASDAQ: OCSL) is a business development company that provides customized financing solutions to mid-market companies across various industries.
Oaktree Specialty Lending reported revenues of $75.27 million, down 20.7% year on year, falling short of analysts’ expectations by 4.6%. It was a disappointing quarter as it posted a significant miss of analysts’ AUM and revenue estimates.
As expected, the stock is down 2.9% since the results and currently trades at $13.12.
Read our full analysis of Oaktree Specialty Lending’s results here.
HA Sustainable Infrastructure Capital (NYSE: HASI)
With a proprietary "CarbonCount" metric that quantifies the environmental impact of each dollar invested, HA Sustainable Infrastructure Capital (NYSE: HASI) is an investment firm that finances and develops climate-positive infrastructure projects across renewable energy, energy efficiency, and ecological restoration.
HA Sustainable Infrastructure Capital reported revenues of $103.6 million, up 4.2% year on year. This print beat analysts’ expectations by 32.1%. Overall, it was a very strong quarter as it also logged a solid beat of analysts’ revenue estimates and full-year EPS guidance exceeding analysts’ expectations.
HA Sustainable Infrastructure Capital delivered the biggest analyst estimates beat among its peers. The stock is up 22.3% since reporting and currently trades at $29.85.
New Mountain Finance (NASDAQ: NMFC)
Operating as a financial bridge for growing businesses that might be overlooked by traditional banks, New Mountain Finance (NASDAQ: NMFC) is a business development company that provides loans and debt financing to middle-market companies in defensive growth industries.
New Mountain Finance reported revenues of $83.49 million, down 11.7% year on year. This number came in 1.6% below analysts' expectations. Overall, it was a slower quarter as it also recorded a miss of analysts’ revenue estimates.
The stock is down 7.4% since reporting and currently trades at $9.54.
Read our full, actionable report on New Mountain Finance here, it’s free for active Edge members.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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