We're at the point in the earnings cycle when the numbers flow fast and furious.
Carlyle Group (CG: $19.24, down 1% this week) rallied 4% going into its 4Q18 results even though we all knew the comparisons wouldn't be flattering after this dismal quarter for all Asset Management firms. Yesterday took all that gain away plus another 1% when that assumption was largely proven true.
Nobody was betting on Carlyle doing anything but losing money last quarter. But management was able to shift enough numbers to bring the burn down to $79 million or $0.15 per share. We were steeled to see a $50 million bigger loss, and as it turns out $20 million in buybacks helped cushion the per-share comparison.
That's when the good news starts. Carlyle managed to find enough distributable income to pay a $0.43 dividend and bank another $200 million for further buybacks. The payout translates into an 8.9% yield, which is strong a reward for patience while the Asset Management business improves. When the stock rebounds to $25 and beyond like many high-profile analysts believe (it's not just us), it'll pay at least 6% a year. And the buyback is big enough to take 10% of the company back off the market. If that doesn't boost the year-over-year numbers, we don't know what will.
Spotify (SPOT: $135, down 1%), the largest paid music-streaming service in the world, just hit a major milestone: an operating profit. And they bought two podcast companies, Gimlet and Anchor, to beef up its podcasting capabilities. As you know, the long-term strategy here points to replacing legacy commercial radio... the paid music subscriptions are only the icing on the cake. Buying two podcast companies opens that model up to include talk "radio" as well as the songs. Spotify just grabbed a piece of that action. Now people around the world can log in to get their chatter instead of tuning in for music only.
The numbers were good. Revenue jumped 30% to $1.7 billion. Spotify added 9 million premium subscribers during the quarter, bringing its total to 96 million. Ad-supported listeners grew to 116 million, with total monthly active users hitting 208 million. 2019 revenue guidance came in a wide range but the midpoint is at worst 1% below where we suspected it would be. Even that tiny weakness will resolve fast.
As noted above, Spotify is busy signing up more by the millions. A year from now, we'll see 240 million people on the platform. If half of them are listening to ads, that's big money in the company's pocket. Spotify is already profitable at this scale. We expected a $0.19 per share loss and got a $0.36 profit.
And then there's MetLife (MET: $45, down 1% at the close and then retreating another 2% overnight). At this point in the cycle the pattern should be familiar: A slight miss on revenue ($15.4 billion instead of the $15.9 billion expected) and a big beat on profit. We were looking for earnings to jump 100% to $1.28 per share. MetLife gave us an extra $0.07 and an extra 10% growth.
That's huge when you consider that revenue was flat from last year's level. Where management only managed to squeeze 4% out of that $15.4 billion top line 12 months ago, more constructive interest rates doubled that margin this year. We see no evidence of cash flow receding from here, which means upside ahead. A year ago MetLife was a $46 stock valued at 8.3X earnings. That multiple has gone down to 7.4X, making it a stronger long-term opportunity than ever. And while we wait, the 3.2% yield isn't huge, but it's secure.