Why did ARCC's Q4 earnings fall short of expectations?

Ares Capital's (ARCC) Q4 earnings fell short of expectations due to several factors:

1. **Net Investment Income (NII) Miss**: The company's NII for Q4 was $359 million, which, although reflecting a modest increase from the previous year's $345 million, did not meet the anticipated $378 million. This shortfall can be attributed to lower-than-expected interest income from investments and net realized losses of $25 million for the quarter, compared to gains of $28 million in the same period the previous year.
2. **Higher Corporate Tax Rate**: Ares Capital incurred a higher corporate tax rate than anticipated, which contributed to the earnings miss. This added an extra burden to the company's financial performance, impacting the bottom line.
3. **Expense Increase**: The company experienced an increase in total expenses, which rose by 9.6% year-over-year, reaching $387 million. This rise was due to increased expenses across various components, except for capital gains incentive fee charges and administrative fees. This increase in expenses, coupled with lower investment income, affected the company's profitability.

In summary, Ares Capital's Q4 earnings fell short of expectations due to a combination of lower-than-anticipated net investment income, higher corporate tax rate, and increased expenses. These factors collectively impacted the company's financial performance, leading to a decline in earnings per share (EPS) and total revenue.

|code|Ticker|Name|Date|Total Revenue|Diluted EPS|market_code|
|---|---|---|---|---|---|---|
|ARCC|ARCC.O|Ares Capital|2024 Q1|7.01E8|0.76|185|
|ARCC|ARCC.O|Ares Capital|2024 Q2|7.55E8|0.52|185|
|ARCC|ARCC.O|Ares Capital|2024 Q3|7.75E8|0.62|185|
|ARCC|ARCC.O|Ares Capital|2024 Q4|7.59E8||185|

|code|Ticker|Name|Date|Revenue Surprise|Total Revenue|market_code|
|---|---|---|---|---|---|---|
|ARCC|ARCC.O|Ares Capital|2024 Q1|-2850000|7.01E8|185|
|ARCC|ARCC.O|Ares Capital|2024 Q2|3.925E7|7.55E8|185|
|ARCC|ARCC.O|Ares Capital|2024 Q3|4550000|7.75E8|185|
|ARCC|ARCC.O|Ares Capital|2024 Q4|-2.64E7|7.59E8|185|

|code|Ticker|Name|Date|EPS Surprise|Diluted EPS|market_code|
|---|---|---|---|---|---|---|
|ARCC|ARCC.O|Ares Capital|2024 Q1|-0.01|0.76|185|
|ARCC|ARCC.O|Ares Capital|2024 Q2|0.03|0.52|185|
|ARCC|ARCC.O|Ares Capital|2024 Q3|-0.01|0.62|185|
|ARCC|ARCC.O|Ares Capital|2024 Q4|-0.03||185|