A month has gone by since the last earnings report for Tree.com (
TREE Quick Quote TREE - Free Report) . Shares have lost about 17.1% 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 the most recent earnings report in order to get a better handle on the important drivers.
LendingTree Reports Q3 Loss on Low Consumer Revenues
LendingTree reported third-quarter 2020 adjusted net loss per share of 26 cents, wider than the Zacks Consensus Estimate of a loss of 15 cents. However, the company had recorded an income of $2.25 per share in the prior-year quarter.
Soft consumer revenues on the prevailing coronavirus crisis impacted the results. Moreover, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) displayed a decline. However, the company’s results were aided by lower expenses and a strong cash position. The bank reported GAAP net loss of $24.8 million or $1.90 per share, as against the net income of $24.5 million or $1.67 recorded in the year-ago quarter. Revenues Decline, Costs Down
Total revenues slid 29% year over year to $220.3 million in the third quarter. This decrease primarily stemmed from lower consumer and other revenues, partly offset by higher home and insurance revenues. The reported figure, however, surpassed the Zacks Consensus Estimate of $207.8 million.
Total costs and expenses came in at $236.4 million, down 15.4% from the prior-year quarter. This decline chiefly resulted from fall in cost of revenues, and selling and marketing expense. Adjusted EBITDA totaled $21.7 million, down 65.6% from the $63 million reported in the year-earlier quarter. Variable marketing margin was $78.1 million, down 32.4% year over year. As of Sep 30, 2020, cash and cash equivalents were $187.3 million, surging significantly from $60.2 million recorded as of Dec 31, 2019. Long-term debt was up significantly from the prior-year end to $603.5 million. Total shareholders' equity was $361 million, down 10.3% from the Dec 31, 2019 level. Outlook
Concurrent with the September-end quarter results, management has issued the fourth-quarter 2020 guidance.
Q4 Total revenues estimated at $200-$215 million. Adjusted EBITDA anticipated in the $13-$18 million band. Variable Marketing Margin projected at $72-$78 million. How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -221.25% due to these changes.
At this time, Tree.com has a nice Growth Score of B, a grade with the same score on the momentum front. However, 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 C. 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. It's no surprise Tree.com has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.