Shares of Bankrate (NYSE:RATE) plunged by double digits on Tuesday after the personal finance information provider lowered its expectations for the third quarter. The company has over three decades of experience in financial publishing, but is it falling behind in the wake of new and popular online resources?
After Monday’s closing bell, Bankrate announced that total revenue for the third quarter is expected to be between $115.5 million and $117.5 million, compared to $112.9 million in the same period last year. Although this represents an increase of about 3 percent, analysts on average were expecting revenue of $132.7 million. The company also said that adjusted earnings for the third quarter is expected to come in between 11 cents and 13 cents, well below Wall Street estimates’ of 20 cents per share.
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Bankrate provides a wide variety of information in regards to mortgage rates, auto loans, debt management, deposit rates and home equity decisions. However, other companies have also entered this industry, especially with home mortgages. Tree.Com (NASDAQ:TREE), Zillow (NASDAQ:Z) and Trulia (NYSE:TRLA) all provide similar services in some capacity.
As the chart above shows, it has been a troubling year for Bankrate. Shares are down about 50 percent. Meanwhile, shares of Zillow and Tree.Com have surged 71 percent and 173 percent year-to-date, respectively. Trulia shares, which debuted on the New York Stock Exchange in September, are relatively flat since opening for trading at $22, but still remain higher than its $17 initial public offering price.
While it certainly appears that competitors are attracting investors away from Bankrate, there are also fundamental changes taking place. Bankrate is making adjustments to its lead generation business. Thomas R. Evans, president and chief executive officer, explains in a press release, “We have continued to make adjustments and have been even more aggressive about cutting back our insurance lead volume as we got more disposition data and feedback. We have seen meaningful improvements in quality and conversion, which we believe will result in better monetization in 2013. Although credit card traffic remains strong, we have seen no change or improvement in approvals.”
For the full year, Bankrate expects revenue growth between 8 percent and 12 percent, down from its prior forecast in the low to mid 20 percent range made in July. “The additional adjustments we have made in our insurance leads business to aggressively cut back on sources to drive higher conversion and quality has resulted in a short term reduction to our results and guidance,” Mr. Evans stated. “We will continue to execute on our strategy to move our insurance leads platform to higher quality, higher converting traffic which we believe will drive higher value and open up new product opportunities to drive growth in 2013.”
Similar to how investors continue to flee Hewlett-Packard (NYSE:HPQ) during its transformation period, investors jumped ship from Bankrate. On Tuesday, shares closed more than 22 percent in the red to reach a new 52-week low near $11 a share.
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