Golub Capital: U.S. Middle Market Shows Strongest Earnings Growth Since 2021

Middle-market private companies in the Golub Capital Altman Index grew earnings by 13% during the first two months of Q3/23, marking the highest year-over-year earnings growth since Q3/21. Revenue grew 8% during the same period.

“Growth exceeded our expectations in the third quarter of 2023. Middle-market companies in general continued to demonstrate resilience and adaptability to the challenging environment,” Lawrence E. Golub, CEO of Golub Capital, said. “The strong results of the consumer sector are encouraging. Consumer sector revenue growth outpaced inflation and profitability held up well, despite the pressure consumers have faced from higher gas prices, higher interest payments on debt and dwindling pandemic-era savings. These are real headwinds, but we did not see their impact in Q3 results. Instead, we saw continued economic momentum.”

“Middle-market cash flow growth year over year was quite remarkable in Q3 2023 despite the reduction in inflation during the period. This suggests the companies tracked by the index likely made cost reductions which helped boost earnings growth,” credit expert Dr. Edward I. Altman said. “Technology stood out once again, as the sector posted revenue and earnings growth nearly twice as high as the index in aggregate. It is not surprising to see [it] continue the trend we highlighted in prior quarters; mission-critical providers of enterprise software are the beneficiaries of the pressure on businesses to increase productivity. Solid growth in the healthcare and industrials sectors rounds out the picture of economic resilience from our vantage point.”

The Golub Capital Altman Index, which is produced by Golub Capital in collaboration with Altman, is an index based on actual revenue and earnings (defined as earnings before interest, taxes, depreciation and amortization, or EBITDA) for middle-market companies. The index measures the median revenue and earnings growth of approximately 110 to 150 private U.S. companies in the loan portfolio of Golub Capital.

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