There’s been a lot of love on Wall Street these past few weeks, with both the S&P 500 and Dow up about 2% in just nine trading days. A lot of the recent strength can be attributed to the fourth-quarter earnings season. Fourth-quarter earnings are blowing past expectations. According to Factset, as of last Friday, 66% of the companies in the S&P 500 have reported earnings. Of those 66%, 71% have reported a positive earnings surprise and 62% reported a positive revenue surprise.
One reason why companies continue to post better-than-expected earnings is due to the fact that 2018 was the biggest year ever recorded for stock buybacks. While the final buyback number for 2018 hasn’t been released yet, more than $800 billion in stock buybacks were announced. So, I anticipate that there was between $800 billion and $1 trillion in stock buybacks in 2018.
Putting that aside, the bottom line is that fourth-quarter earnings have been phenomenal so far. As an example, I’d like to shine the earnings spotlight on Match Group, Inc. (MTCH).
Over the past two decades, online dating has grown in popularity among virtually all age groups, from young adults to baby boomers. But did you know that the company pioneered the concept of online dating? Back in 1995, Match Group launched its first dating website, match.com. Today, it is the global leader in dating products, with apps and products that help create connections across genders, ages and interests.
You’re likely familiar with several of Match Group’s brands. The company has a portfolio of 45 brands, including match, PlentyofFish, Tinder, OurTime.com and okcupid. Match Group’s apps and products are offered in 42 languages in more than 190 countries around the globe. The company has approximately seven million subscribers, and tinder is the number-one downloaded and top-grossing app worldwide.
However, investors weren’t interested in buying MTCH flowers and candy ahead of the company’s fourth-quarter results on February 6. In fact, the stock slipped about 4% after an analyst downgraded it ahead of its earnings release. The Deutsche Bank analyst moved MTCH from a “buy” to a “hold” rating, citing a decline in Tinder subscriber growth. But MTCH rebounded strongly, jumping nearly 10% in the past week.
The reason why is simple: Match Group reported that Tinder results actually drove better-than-expected fourth-quarter results. The company’s Tinder app added 233,000 new paying members during the quarter, which brings Tinder’s total subscriber base to 4.3 million.
Match Group also reported that it turned a profit during the fourth quarter. Earnings surged to $116 million, or $0.39 per share, up from a loss of $9 million, or a $0.03 per share loss, in the same quarter a year ago. Adjusted earnings per share doubled to $0.39, up from $0.18 per share, and topped analysts’ estimates for $0.38 per share by 2.6%. Fourth-quarter revenue came in at $457 million, also beating estimates for $448.43 million.
Looking ahead, Match Group expects first-quarter revenue between $455 million and $465 million. That represents 11.7% to 14.1% annual revenue growth. The forecast is slightly lower than the current consensus estimate, which calls for revenue of $469.6 million.
The stock hit a new 52-week high of $60.91 following the report, and I see further highs ahead. MTCH has a solid B rating on my Portfolio Grader, making it a good match (pun intended!) for your portfolio right now.