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Why Is Tree.com (TREE) Down 5.3% Since Last Earnings Report?

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It has been about a month since the last earnings report for Tree.com (TREE - Free Report) . Shares have lost about 5.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Tree.com due for a breakout? 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 Q2 Earnings Miss Estimates, Revenues Down

LendingTree reported second-quarter 2020 adjusted net income per share of 46 cents, missing the Zacks Consensus Estimate of 61 cents. Further, the figure comes in lower than the prior-year quarter’s $1.18 per share.

Reduction in consumer revenues on coronavirus woes was a headwind. Moreover, adjusted EBITDA displayed decline. However, the company’s results were aided by lower expenses and a strong cash position.

The company reported GAAP net loss of $8.6 million or 66 cents per share, as against the net income of $13 million or 87 cents recorded in the year-ago quarter.

Revenues Decline, Costs Down

Total revenues plunged 34% year over year to $184.3 million in the second quarter of 2020. This decrease primarily stemmed from lower consumer and other revenues, partly offset by higher home and insurance revenues. The reported figure also lagged the Zacks Consensus Estimate of $185.1 million.

Total costs and expenses came in at $191.9 million, down 27.9% from the prior-year quarter. This decline chiefly resulted from fall in cost of revenues, and selling and marketing expense.

Adjusted EBITDA totaled $30.8 million, down 33% from the $46.3 million reported in the prior-year quarter. Variable marketing margin was $82.5 million, down 12% year over year.

As of Jun 30, 2020, cash and cash equivalents were $101.8 million, surging nearly 69% from Dec 31, 2019. Long-term debt was up 2.6% from the prior-year end to $271.4 million. Total shareholders' equity was $406 million, up 1% from the Dec 31, 2019 level.

Outlook

Concurrent with the June-end quarter results, management has issued third-quarter 2020 estimates.

Third-Quarter 2020

  • Total revenues of $200-$215 million projected.
  • Adjusted EBITDA anticipated in the $16-$21 million band.
  • Variable Marketing Margin projected at $72-$80 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -941.46% due to these changes.

VGM Scores

Currently, Tree.com has a great Growth Score of A, 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 lowest 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.

Outlook

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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