Run on the Bankrate

Make up your mind, Mr. Market. Is it good earnings you want, or good guidance?

There's no denying it: Motley Fool Rule Breakers recommendation Bankrate (Nasdaq: RATE) fell short of the former when it reported earnings on Tuesday. Bankrate closed out the quarter with $25.2 million in revenues for the year, or 22% better than last year. Excluding stock compensation and legal expenses, adjusted earnings grew 22% to $0.33, but still missed analysts' expectations for the quarter by $0.06. (Flash back to the company's third-quarter earnings here.)

So what happened? Given Bankrate's business model, it wasn't entirely immune from the turmoil that affected large financial and mortgage institutions like Citigroup (NYSE: C), Merrill Lynch (NYSE: MER), and Countrywide (NYSE: CFC) in December. Besides a slowdown in traffic, several large companies cancelled their display ads. This contributed to Bankrate's $2 million hit in canceled display ads in December. But is it all downhill from here?

What about the guidance?
That's the thing. So often in investing, we see companies that report fabulous results get thrashed on weak guidance. It's hard to know quite what to make of it when the reverse happens.

You see, in addition to releasing earnings on Tuesday, Bankrate announced two new bolt-on purchases: the assets of InsureMe (which markets -- you guessed it -- insurance products) and Fee Disclosure (which provides local data on mortgage transactions and closing fees for homebuyers). The purchase price was a combined $68 million, with an additional $20 million in potential cash earn-outs.

This comes on the tail of two other acquisitions in December. Between Bankrate's own organic growth and the new revenue streams from the acquisitions, the company now expects to book as much as $172 million in revenue this year -- 80% better than in 2007, and about 20% higher than the average analyst was estimating.

Is that doable? Can Bankrate really sidestep the mortgage mess that's ruined E*Trade (Nasdaq: ETFC)? The housing downturn that's left Home Depot devoid of shoppers? And of course, the falloff in online advertising that spooked Google (Nasdaq: GOOG) investors last week and that -- as I recently argued -- may even have scared News Corp. (NYSE: NWS) away from its plan to set WSJ.com free?

I believe Bankrate can indeed avoid these landmines and keep growing despite all the naysayers' naysaying. Why? Basically, it comes down to this. Online advertising might weaken with the weak economy. But a combination of low (and falling) interest rates, plus a supersaturated housing market that makes home-selling harder than ever, will both benefit a company like Bankrate, which cuts through the clutter and delivers critical data to the homebuyer. Interest rate fluctuations will similarly drive current homeowners to seek out refinancing data on Bankrate, and fixed-income savers to look up CD rates.

Whatever the skeptics might say, volatility in the financial markets is not Bankrate's foe but its friend.