Private mid-market companies in the US have shown an 8.45 percent growth in revenue over January and February, a new report from Golub Capital has found.
The earnings growth for the first two months of 2017 marks a year-on-year increase of 5.33 percent for the same time last year, according to the Golub Capital Middle Market Report released on Monday.
The report indexes sales and earnings data for more than 150 private companies in Golub’s loan portfolio. The mid-market lender co-authors the report with Edward Altman, a New York University Stern School of Business professor emeritus of finance.
But the recent revenue increases were coupled with a slight EBIDTA decline of 1.64 percent over the first two months of 2017, the firm also said.
This marks a continued decline in US private mid-market businesses’ earnings, which showed a 2.48 percent earnings drop in the fourth quarter of 2016.
“Despite high consumer confidence indicators, as buying patterns change, the sector continues to experience margin pressure,” professor Edward Altman said in a statement. “The results across all sectors show signs that the economy is struggling with inflationary costs, including big increases in wages and other operating costs.”
“Earnings pressures will lead to more defaults and credit losses,” Lawrence Golub, chief executive officer at the firm, told Private Debt Investor.” This environment is especially tough on firms under pressure to deploy capital quickly now in an effort to achieve scale before the music stops.”
Golub noted in its report that the US economy grew at a pace of 2-3 percent during year’s first two months.
“This was a particularly strong quarter for the information technology sector, which led profit growth with an increase of 11.06 percent,” said Golub in the statement, while “other sectors continue to experience cost pressures, largely from rising labor costs”.
The report, based on the proprietary Golub Capital Altman Index, aims to represent the general performance of mid-market companies, relevant to the aggregate economic performance of the US economy, and to inform the investment community.
Golub’s mid-market lending group provides financing for private equity-backed transactions up to $400 million and credit facilities up to $750 million. The global credit asset manager has over $20 billion of capital under management.