LendingTree (TREE) Stock Down 3.33% on Q4 Earnings Miss

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Shares of LendingTree TREE declined 3.33% following the release of its fourth-quarter 2018 results. The company reported adjusted net income per share of $1.22, lagging the Zacks Consensus Estimate of $1.51. However, the figure compares favorably with the prior-year quarter’s tally of 84 cents.

The company’s results reflected rise in expenses. However, higher revenues, with major contribution from non-mortgage products revenues, were a tailwind. Also, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) displayed impressive growth.

The company reported GAAP net income of $0.3 million or 2 cents per share compared with net loss of $6.5 million or 54 cents in the year-ago quarter.

For 2018, adjusted net income was $80.3 million or $5.70 per share compared with $51.7 million or $3.78 per share in 2017.

Rise in Revenues Partially Offset by Higher Expenses

For 2018, total revenues were $764.9 million, up 23.8% year over year. The revenue figure also surpassed the Zacks Consensus Estimate of $770.1 million.

Total revenues grew 26% year over year to $202.7 million in the quarter. The rise primarily stemmed from higher non-mortgage product revenues, partly offset by lower mortgage revenues. However, it missed the Zacks Consensus estimate of $207.8 million.

Total costs and expenses were $200.2 million, up 24.3% from the prior-year quarter. This upswing primarily resulted from rise in almost all components of cost.

Adjusted EBITDA totaled $39.4 million, up 33% from $29.6 million reported in the prior-year quarter.

As of Dec 31, 2018, cash and cash equivalents were $105.1 million, down nearly 71.5% from Dec 31, 2017. Long-term debt climbed 5.3% from the year-end to $250.9 million. Total shareholders' equity was $346.2 million, up 17.4% from the Dec 31, 2017 level.

Capital Deployment Activity

During the reported quarter, the company repurchased 174,000 shares of its common stock at a weighted-average price of $203 per share for a total cost of $35.4 million.

Outlook

Concurrent with the fourth-quarter results, management provided first-quarter 2019, as well as revised its full-year 2019 estimates.

First-Quarter 2019

  • Total revenues projected at $235-$245 million, up 30-35% year over year.

  • Adjusted EBITDA estimated in the $37-$40 million band. This represents growth of 17-26% year over year.

  • Variable Marketing Margin is projected at $82-$86 million.

Full-Year 2019

  • Total revenues of $1,010-$1,045 million predicted, up from the previous projection of $990-$1,030 million. This represents growth of 32-37% year over year.

  • Adjusted EBITDA anticipated in the $205-$215 million band, up from the prior projection of $195-$205 million. This represents 34-40% year-over-year improvement.

  • Variable Marketing Margin is projected at $385-$400 million, up from the prior estimate of $365-$385 million.

Conclusion

Lending Tree put up a decent performance during the Oct-Dec period as comparable to the prior-year period. The company’s expansion strategy for its non-mortgage business seems to be working well, mirrored by the continued rise in its non mortgage revenues. Also, LendingTree’s commitment to diversify product offerings beyond mortgage-related products augurs well for the long term.

Nevertheless, escalating expenses remain a concern.

Currently, LendingTree carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Finance Stocks

BlackRock, Inc.’s BLK fourth-quarter 2018 adjusted earnings of $6.08 per share missed the Zacks Consensus Estimate of $6.39. Further, the figure came in 2% lower than the year-ago tally.

People's United Financial Inc. PBCT reported fourth-quarter 2018 operating earnings of 36 cents per share, surpassing the Zacks Consensus Estimate of 34 cents. Also, the figure improved 16% year over year.

Legg Mason Inc. LM reported positive earnings surprise of 5.8% in third-quarter fiscal 2019 (ended Dec 31). The company reported adjusted net income of 73 cents per share, outpacing the Zacks Consensus Estimate of 69 cents. The reported figure, however, declined 27.7% year over year.

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