US mid-market private company earnings continue to grow
The US-based middle-market private companies in Golub Capital’s loan portfolio saw their earnings and revenue grow towards the end of last year, the firm has reported.
According to the latest Golub Capital Altman Index, which tracks the median revenue and earnings growth of 110–150 private US companies in the company’s loan portfolio, mid-market companies in the US continued to grow across 2024.
Private equity-backed companies reported their sixth consecutive quarter of profit margin expansion in the final quarter of 2024.
Meanwhile, mid-market private companies in the US grew their earnings by nine per cent during the first two months of the fourth quarter of 2024, while revenue grew by six per cent during the same period.
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Lawrence E. Golub, chief executive of Golub Capital, noted that companies in the consumer sector performed particularly well last year.
“Revenue and earnings growth remained strong for companies in the Golub Capital Altman Index for the ninth consecutive quarter,” said Golub.
“The consumer sector of the index stands out for posting higher revenue and earnings growth rates in Q4 than in any other quarter of 2024.
“The solid performance of consumer companies in our sample paints an encouraging picture of the US consumer. We highlighted in prior quarters that the balance of headwinds and tailwinds facing consumers would be an important dynamic for investors to watch in the second half of 2024.
“Our early look at Q4 results suggests that the tailwinds from continued low unemployment, healthy wage growth, lower energy prices and lower interest rates prevailed.
“Looking forward, the health of the US consumer may call for a slower pace of interest rate cuts than expected: one closer to the path implied by current Fed futures market prices than to the most recent Fed dot plot.”
The Golub Capital Altman Index is produced by Golub Capital in collaboration with credit expert Dr. Edward I. Altman.
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Altman added that the consistency of revenue and earnings growth rates across sectors points to broad-based economic strength in the fourth quarter of 2024.
“Profit margins also continued to expand, as aggregate earnings growth materially outpaced aggregate revenue growth for a sixth consecutive quarter,” he added.
“We note that consumer sector performance in Q4 could be even better than it looks from the strong performance of companies in our sample, as our data does not capture the robust holiday season spending in December.
“That said, we encourage investors to remain vigilant about performance dispersion within sectors and within portfolios; strong median performance does not tell the whole story, and skill at avoiding problem credits and at managing them effectively when they occur are critical differentiators of long-term investor performance.”
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