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J.P. Morgan upgrades PennantPark after progress managing portfolio investments

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J.P. Morgan upgrades PennantPark after progress managing portfolio investments

J.P. Morgan analyst Richard Shane has upgraded PennantPark Investment Corp. to "overweight" from "neutral" after the company reported second-quarter progress managing funding and portfolio investments.

As of June 30, PennantPark had no loans on non-accrual and reported an improved funding profile.

"We believe [PennantPark] now represents an attractive risk-reward proposition relative to many [business development company] peers," Shane wrote in an Aug. 9 note.

Even though the company's exposure to energy is still elevated, Shane wrote, PennantPark management has been encouraged by results from oilfield services companies U.S. Well and American Gilsonite. He also noted that net exits are driving realized gains on the portfolio and that management remains focused on transitioning the portfolio toward relatively lower-risk investments to reduce volatility.

J.P. Morgan now estimates the company's 2017 EPS will be 85 cents, up from 84 cents. However, it decreased its 2018 EPS estimate to 79 cents from 82 cents and decreased its 2019 EPS estimate to 80 cents from 85 cents.

The analyst increased his December 2018 price target to $8.50, up from $8.00.