Middle market private companies in the Golub Capital Altman Index grew earnings by 8% during the first two months of Q3/24. Revenue grew 5% during the same period.

“Solid revenue and earnings growth continued for companies in the Golub Capital Altman Index for the eighth consecutive quarter. The cost discipline and pricing power we highlighted throughout the recent inflationary period continues to pay dividends for many companies in our sample, as aggregate earnings growth materially outpaced aggregate revenue growth for the fifth consecutive quarter,” Lawrence E. Golub, CEO of Golub Capital, said. “These encouraging trends come with a caveat. Dispersion in operating performance is increasing, both in our sample and in the broader credit market. Even in a strong sector like technology, which posted another quarter of double-digit earnings growth, there’s a striking performance gap between mission-critical enterprise software providers with dominant market share and others in more fragmented and competitive markets. We expect to see greater performance dispersion in the coming period, both within and across sectors.”

“We noted in last quarter’s report 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 sample of Consumer companies painted a mixed picture in Q3 2024, much like recent macroeconomic data. Solid revenue and EBITDA growth, in aggregate and in most sectors in our sample, suggests consumer spending continued to surpass low expectations, while a slight decline in EBITDA year-over-year indicates that wage growth and labor market strength continued to put pressure on margins,” Dr. Edward I. Altman said. “These mixed signals, together with increased dispersion in operating performance, illustrate that while many companies are adapting well to this environment, the lowest-performers are falling further behind. Our data suggests that skill at avoiding problem credits, especially for firms that are vulnerable to relatively high interest costs, and at managing problems effectively when they occur, are likely to be key drivers of investor returns in the coming period.”