By Arasu Kannagi Basil
(Reuters) -Carlyle Group’s distributable fourth-quarter earnings missed market expectations on Tuesday, eclipsing a strong growth in the alternative asset manager’s capital market business and sending its shares down 6.1%.
The profit miss was largely due to lower proceeds from asset sales, resulting in a 24.1% slide in earnings at its private equity business.
The asset manager’s profit available to shareholders stood at $384 million, or 92 cents per share, 4 cents short of analysts’ expectations, according to LSEG estimates.
Its realized performance revenue, mostly driven by asset sales from its private equity arm, fell 4.7% to $245.7 million.
Carlyle expects declines in its private equity business to be significantly less in 2025 and growth to resume based on some capital raise in its next U.S. buyout fund, which is slated to launch later this year.
The company achieved the financial goals laid out at the start of the last year. Under CEO Harvey Schwartz, Carlyle has prioritized margin growth and investment performance by rejigging leadership and realigning its compensation model.
Credit, Carlyle’s biggest business by assets, saw distributable earnings jump 20.6%, helping soften the blow in the quarter.
While the management continues to improve the platform, based on investor conversations, the pace of gains is likely well below expectations, TD Cowen analyst Bill Katz said.
Carlyle’s fee-related earnings jumped 13% to a quarterly record of $287.4 million, while assets under management rose 4% to $441 billion.
Inflows stood at $14.2 billion in the quarter, driven by its credit business. Carlyle retained $84 billion of unspent capital and deployed $17.6 billion in investments.
It anticipates FRE to increase 6% this year, while inflows are expected to be similar to 2024 levels.
The reactivation of a cycle of private equity realizations being recycled by investors back into the buyout funds would be key to get the stock moving higher, Oppenheimer analyst Chris Kotowski said.
CAPITAL MARKETS SHINE
In a bright spot, Carlyle’s transaction and portfolio advisory fees more than doubled to $80.6 million in the fourth quarter, exceeding Street expectations of $55.3 million.
Capital markets has been a major focus area for Carlyle since Schwartz took the mantle in early 2023. For 2024, the business had a record year.
Rival KKR last week reported strong growth in its capital markets business.
Carlyle’s corporate private equity funds and real estate funds rose 1%, while global credit funds gained 3%.
In terms of exits, Carlyle in October took portfolio companies StandardAero and Rigaku public in the U.S. and Japan, respectively.
The asset manager had in December agreed to sell Italian component maker Forgital to U.S. alternative investment firm Stonepeak in a deal valued at more than 1.5 billion euros ($1.55 billion).
($1 = 0.9691 euros)
(Reporting by Arasu Kannagi Basil in Bengaluru; Editing by Arun Koyyur and Pooja Desai)
