As the Q3 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the specialty finance industry, including Hercules Capital (NYSE: HTGC) and its peers.
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 9 specialty finance stocks we track reported a mixed Q3. As a group, revenues missed analysts’ consensus estimates by 3%.
In light of this news, share prices of the companies have held steady as they are up 1.8% on average since the latest earnings results.
Hercules Capital (NYSE: HTGC)
Named after the mythological hero known for his strength, Hercules Capital (NYSE: HTGC) is a business development company that provides debt financing to venture capital-backed and growth-stage technology and life sciences companies.
Hercules Capital reported revenues of $138.1 million, up 10.3% year on year. This print was in line with analysts’ expectations, but overall, it was a mixed quarter for the company with EPS and revenue in line with analysts’ estimates.
Interestingly, the stock is up 2.5% since reporting and currently trades at $18.05.
Is now the time to buy Hercules Capital? Access our full analysis of the earnings results here, it’s free for active Edge members.
Best Q3: 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 $460.4 million, up 25.4% year on year, outperforming analysts’ expectations by 11.9%. The business had an incredible quarter with a beat of analysts’ EPS estimates and a solid beat of analysts’ revenue estimates.
The market seems happy with the results as the stock is up 18.4% since reporting. It currently trades at $50.68.
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 Q3: DigitalBridge (NYSE: DBRG)
Transforming from a traditional real estate investor to a digital-focused powerhouse in 2021, DigitalBridge Group (NYSE: DBRG) is a global digital infrastructure investment firm that manages capital and operates assets across data centers, cell towers, fiber networks, and edge infrastructure.
DigitalBridge reported revenues of $3.82 million, down 95% year on year, falling short of analysts’ expectations by 96.2%. It was a disappointing quarter as it posted a significant miss of analysts’ EBITDA and revenue estimates.
DigitalBridge delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 16.3% since the results and currently trades at $10.65.
Read our full analysis of DigitalBridge’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 $139.2 million, up 51.5% year on year. This number surpassed analysts’ expectations by 58.5%. It was a stunning quarter as it also logged a solid beat of analysts’ revenue estimates and an impressive beat of analysts’ EBITDA estimates.
HA Sustainable Infrastructure Capital delivered the biggest analyst estimates beat and fastest revenue growth among its peers. The stock is up 19% since reporting and currently trades at $34.
Farmer Mac (NYSE: AGM)
Created by Congress in 1987 to build a bridge between Wall Street and rural America, Farmer Mac (NYSE: AGM) provides a secondary market for agricultural and rural loans, helping lenders increase their liquidity and lending capacity to serve rural America.
Farmer Mac reported revenues of $94.96 million, up 11.1% year on year. This print came in 6% below analysts' expectations. It was a softer quarter as it also recorded a significant miss of analysts’ revenue estimates.
The stock is up 5% since reporting and currently trades at $165.55.
Read our full, actionable report on Farmer Mac here, it’s free for active Edge members.
Market Update
The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.
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