It has been about a month since the last earnings report for Tree.com (TREE - Free Report) . Shares have added about 4% 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 the most recent earnings report in order to get a better handle on the important catalysts.
LendingTree Q3 Earnings Beat on Revenues
LendingTree reported adjusted third-quarter 2018 net income per share of $1.92, surpassing the Zacks Consensus Estimate of $1.78. The figure compares favorably with the prior-year quarter’s tally of $1.17.
The company’s results primarily benefited from higher revenues, with major contribution from non-mortgage products revenues. Also, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) displayed impressive growth. However, flaring up expenses was a major headwind.
The company reported GAAP net income of $28.4 million or $2.05 per share compared with $10.1 million or 74 cents in the year-ago quarter.
Rise in Revenues Partially Offset by Higher Expenses
Total revenues grew 15% year over year to $197.1 million. The rise primarily stemmed from higher non-mortgage product revenues. However, it lagged the Zacks Consensus estimate of $200.1 million.
Total costs and expenses were $176.8 million, up 14.8% from the prior-year quarter. This upswing primarily resulted from rise in almost all components of cost. However, lower litigation settlements and contingencies was a mitigating factor amid rise of all expenses.
Adjusted EBITDA totaled $45.3 million, up 31% from $34.7 million reported in the prior-year quarter.
As of Sep 30, 2018, cash and cash equivalents were $265.2 million, down nearly 28.1% from Dec 31, 2017. Long-term debt climbed 4% from the year-end to $247.7 million. Total shareholders' equity was $376.5 million, up 27.7% from the Dec 31, 2017 level.
Capital Deployment Activity
During the reported quarter, the company repurchased 49,000 shares of its common stock at a weighted-average price of $230 per share for a total cost of $11.2 million.
Concurrent with the third-quarter results, including two months' impact from the QuoteWizard acquisition, management provided revised full-year 2018 estimates.
- Total revenues of $765-$775 million, up from the previous projection of $745-$765 million.
- Adjusted EBITDA in the $152-$155 million band, up from the previous projection of $148-$152 million. This represents growth of 32-35% year over year.
- Variable Marketing Margin is projected at $283-$288 million, up from the prior estimate of $275-$285 million.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months. The consensus estimate has shifted 8.05% due to these changes.
At this time, 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 bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Tree.com has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.