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Is TrueCar (TRUE) Likely to Disappoint this Earnings Season? - Analyst Blog

Zacks Equity Research
Updated

TrueCar, Inc. TRUE is slated to report second-quarter 2015 results on Aug 6. Last quarter, the company posted in-line results.

Let’s see how things are shaping up for this announcement.

Factors to Consider

TrueCar reported decent first-quarter 2015 results with both the top line and the bottom line meeting the respective Zacks Consensus Estimate.

In a conference call held on Jul 23, TrueCar CEO Scott Painter and CFO Michael Guthrie announced that the company will not be able to meet the previously-issued guidance for second-quarter earnings.

The company also stated that the reasons behind the shortfall were indeed a “wake-up call to focus on the business.”

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Revenues and profits are likely to fall short primarily as fewer consumers purchased cars via TrueCar in the second quarter. Guthrie noted that second-quarter earnings are likely to be hurt by higher expenditure to develop the company’s mobile platforms.

The online car shopping company now expects net loss of $15 million to $15.5 million, revenues of $65 million to $65.3 million, and full-year revenues within the $252 million to $258 million range.

The Zacks Consensus Estimate for second-quarter revenues is pegged at $68 million.

"While we set new records for units, revenue and dealer count within the quarter, we experienced execution challenges in meeting our growth expectations," concluded CEO Painter.

Earnings Whispers

Our proven model does not conclusively show that True is likely to beat earnings this quarter as it does not have the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 16 cents. Hence, the difference is 0.00%.

Zacks Rank: TrueCar currently has a Zacks Rank #4 (Sell).

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies that you may want to consider as our model shows these have the right combination of elements to post an earnings beat:

ZAGG Inc. ZAGG, with an Earnings ESP of +12.50% and a Zacks Rank #2.

Sprint Corporation S, with an Earnings ESP of +25.00% and a Zacks Rank #3.

Interxion Holding NV INXN, with an Earnings ESP of +6.67% and a Zacks Rank #3.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
SPRINT CORP (S): Free Stock Analysis Report
 
ZAGG INC (ZAGG): Free Stock Analysis Report
 
INTERXION HLDG (INXN): Free Stock Analysis Report
 
TRUECAR INC (TRUE): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research