A month has gone by since the last earnings report for Tree.com (TREE). Shares have added about 1.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Tree.com due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
LendingTree Q1 Earnings Miss Estimates
LendingTree reported a negative earnings surprise of 12.7% in first-quarter 2019. Adjusted net income per share of $1.10 lagged the Zacks Consensus Estimate of $1.26. However, the figure comes in line with the prior-year quarter's reported tally.
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. All these positives raised investors’ optimism leading to 5.78% rise in shares of LendingTree, following the release.
The company reported GAAP net income of $0.6 million or 4 cents per share compared with $35.9 million or $2.41 in the year-ago quarter.
Revenue Growth Partially Offset by Higher Expenses
Total revenues soared 45% year over year to $262.4 million in the first quarter. This upside primarily stemmed from higher non-mortgage product revenues, partly mitigated by lower mortgage revenues. Further, the reported figure outpaced the Zacks Consensus Estimate of $239 million.
Total costs and expenses came in at $264.2 million, flaring up 59.4% from the prior-year quarter. This upswing primarily resulted from rise in almost all components of cost.
Adjusted EBITDA totaled $43 million, up 36% from $31.7 million reported in the prior-year quarter.
As of Mar 31, 2019, cash and cash equivalents were $65 million, down nearly 38.5% from Dec 31, 2018. Long-term debt inched up 1.3% from the prior-year end to $254.2 million. Total shareholders' equity was $352.2 million, up 1.7% from the Dec 31, 2018 level.
Concurrent with the first-quarter results, management provided second-quarter 2019 guidance, as well as revised its full-year 2019 estimates.
- Total revenues projected at $260-$270 million.
- Adjusted EBITDA estimated in the $45-$47 million band.
- Variable Marketing Margin is projected at $92-$97 million.
- Total revenues of $1,060-$1,090 million predicted, up from the previous projection of $1,010-$1,045 million.
- Adjusted EBITDA anticipated in the $210-$220 million band, up from the prior forecast of $205-$215 million.
- Variable Marketing Margin is projected at $400-$415 million, up from the prior estimate of $385-$400 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -31.21% due to these changes.
Currently, Tree.com has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Tree.com has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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LendingTree, Inc. (TREE) : Free Stock Analysis Report
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