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Can TrueCar (TRUE) Spring a Surprise This Earnings Season?

TrueCar, Inc. TRUE is slated to report first quarter 2016 results on May 5. Last quarter, the company posted a negative earnings surprise of 73.33%.

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

Factors to Consider

TrueCar reported impressive fourth quarter 2015 results with revenues increasing 15% from the year-ago quarter.

The company appointed Chip Perry, former AutoTrader.com CEO, as the president and CEO, effective Dec 15 mainly to oversee the company’s investment activities.

TrueCar’s strengths are its new segment-leading car pricing transparency model, its commercial platform to monetize consumer-dealer introductions in the online auto industry; close relationships with affinity partners including AAA (AAAE), USAA (UVAXX), Sam’s Club and American Express; and a positive brand image.

Perry wants to leverage these strengths to make TrueCar a pioneer in the online automotive space and provide the best value proposition to car buyers, dealers and automakers.

The company will focus on more effective execution of its business model to ensure high revenue growth and positive margins.

It will increase investment in technology and improve its digital platform so that certified dealers engage more with in-market consumers.

TrueCar’s three-fold future strategy includes development of a digital marketplace that makes automotive transactions smooth, creating value for dealers and customers and keeping customers updated with valuable information.

For the first quarter, TrueCar expects revenues between $270 million and $275 million and, adjusted EBITDA to break even.

Earnings Whispers

Our proven model does not conclusively show that TrueCar is likely to beat estimates 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 per share. Hence, the difference is 0.00%.

Zacks Rank: TrueCar currently has a Zacks Rank #3 which when combined with a 0.00% ESP makes surprise prediction difficult.

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 stocks that you may want to consider as our model shows these have the right combination of elements to post a positive earnings surprise:

  • Benefitfocus, Inc. BNFT, with an Earnings ESP of +1.00% and a Zacks Rank #2
  • Spectra Energy Partners, LP SEP,with an Earnings ESP of +2.27% and a Zacks Rank #3
  • Alibaba Group Holding Ltd. BABA, with an Earnings ESP of +23.68% and a Zacks Rank #3

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TRUECAR INC (TRUE): Free Stock Analysis Report
 
SPECTRA EGY PTR (SEP): Free Stock Analysis Report
 
ALIBABA GROUP (BABA): Free Stock Analysis Report
 
BENEFITFOCUS (BNFT): Free Stock Analysis Report
 
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