Ares Management misses third-quarter earnings estimates but beats on revenue

Revenue of $1.43 billion topped the $1.30 billion expected, while CEO Michael Arougheti says the firm expects another record fundraising year.

Ares Management reported third-quarter after-tax realized income of $1.26 per share, $0.06 below expectations, even as revenue of $1.43 billion beat the $1.30 billion forecast. Chief Executive Michael Arougheti said the firm expects another record fundraising year, with a strong fourth quarter, on sustained demand from institutional and wealth clients.

The gap between the two results is the detail to watch. A revenue beat alongside an earnings miss points to higher costs or fee drag tied to integration rather than weak demand. That fits Arougheti's outlook, but investors will have to weigh it against his guidance for the fourth quarter.

Ares is absorbing two large deals. It is buying Infinity Transportation from KKR for $2.9 billion. On October 26, Ares Capital Corporation also agreed to acquire MidCap Financial Investment Corporation in a stock-and-cash deal valued at about $2.6 billion. A subsidiary of Ares is funding the cash portion. Both weigh on near-term results while management asks investors to look past them.

Ares declared a quarterly dividend of $1.35 per share on its Class A and non-voting common stock, payable December 31 to holders of record on December 17. It also declared $0.84375 per share on its 6.75% Series B mandatory convertible preferred stock, payable January 1, 2027 to holders of record on December 15.