What happened

Shares of Cars.com (NYSE:CARS), 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.

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