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Cars.com Soars 34% After Strong Earnings Beat

By Daniel Miller – May 6, 2020 at 11:17AM

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Cars.com had solid momentum until COVID-19, and it still salvaged a strong first-quarter result.

What happened

Shares of Cars.com (CARS 5.07%), a digital marketplace connecting buyers and sellers in the automotive industry, are soaring 34% after the company crushed first-quarter earnings estimates.

So what

First-quarter revenue checked in at $148 million, down 4% compared to the prior year but in line with guidance and ahead of analysts' estimates of $144 million. Adjusted earnings per share reached $0.32, well ahead of analysts' estimates calling for $0.24 per share. But there were highlights beyond the top- and bottom-line beats. Average monthly unique visitors jumped 11% from the prior year to just under 25 million, and traffic (visits) was up 20% to just under 159 million. Dealer customers grew for the second consecutive quarter.

Car graphic above a tablet

Image source: Getty Images.

"We built on our momentum in Q4 to deliver solid first-quarter Revenue and Adjusted EBITDA through Traffic increases, continued improvements in growing dealer count and solid OEM advertising. This serves as evidence that our business strategy had strong momentum pre-COVID-19 and will continue to deliver benefits to customers and consumers when we emerge from this crisis," said Alex Vetter, president and chief executive officer of Cars.com, in a press release.

Now what

The company had strong revenue and adjusted EBITDA momentum through mid-March, but COVID-19 and social distancing restrictions had a severe impact. Management was quick to react with a 250-person furlough of its workforce followed by a 170-person permanent reduction, and it also drew down $165 million from the company's revolving credit facility. Cars.com appears poised for growth in a standard economic environment -- which is no easy feat, as most of the automotive industry has been hit hard during COVID-19 -- and if the U.S. can keep the pandemic under control while gradually reopening parts of the economy, the company could return to growth sooner rather than later.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Cars.com Inc. Stock Quote
Cars.com Inc.
CARS
$12.01 (5.07%) $0.58

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