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Why Is Tree.com (TREE) Down 26.2% 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 26.2% 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 catalysts.

LendingTree Q4 Earnings Fall Y/Y on Lower Revenues

The company reported adjusted net income per share of 13 cents per share in the quarter, down 88% from $1.12 reported in the prior-year quarter. The Zacks Consensus Estimate was pegged at a loss of 69 cents.

The company’s results were adversely impacted by lower consumer revenues on coronavirus woes, partially offset by decreased expenses and a strong cash position. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) displayed a decline from the prior-year quarter.

The company reported GAAP net loss from continuing operations of $8.1 million or 62 cents per share compared with the $1.5 million or 10 cents reported in the year-ago quarter.

For 2020, net loss (GAAP basis) was $48.2 million or $3.71 per share compared with net income of $17.8 million or $1.22 witnessed in 2019.

Revenues Decline, Expenses Fall

For 2020, total revenues were $909.9 million, down 17.8% year over year. The revenue figure comes in line with the Zacks Consensus Estimate.
Total revenues trimmed 13% year over year to $222.3 million in the final quarter of 2020. This downside primarily stemmed from lower consumer revenues. The reported figure, however, surpassed the Zacks Consensus Estimate of $221.3 million.

Total costs and expenses came in at $226 million, dropping 8% from the prior-year quarter. This downswing primarily resulted from a drop in cost of sales, selling and marketing expenses, amortization of intangibles and severance and litigation expenses.

Adjusted EBITDA totaled $26.3 million, down 43% from the prior-year quarter. Variable marketing margin came in at $82.3 million, a dip of 12% year over year.

As of Dec 31, 2020, cash and cash equivalents were $169.9 million, boosting by a significant 182% from Dec 31, 2019. Long-term debt was up 131% from the prior-year end to $611.4 million. Total shareholders' equity was $364.7 million, down 9.3% from the Dec 31, 2019 level.

Outlook

Concurrent with the December-end quarter results, management issued first-quarter 2021 estimates.

•    Total revenues of $260-$270 million projected.
•    Adjusted EBITDA anticipated in the $20-$25 million band.
•    Variable Marketing Margin projected at $80-$85 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month. The consensus estimate has shifted 20.92% due to these changes.

VGM Scores

At this time, Tree.com has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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

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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