Bankrate (RATE) Posts Surpise 'Beat and Raise' Quarter, RBC Capital Notes

RBC Capital analyst Rohit Kulkarni reiterated an Outperform rating on Bankrate (NYSE: RATE) while trimming his price target to $15.00 (from $18.00) following a surprise beat and raise.

The keys to the quarter, according to the analyst: Positives: 1) Finally, reported EPS on a normal schedule. 2) Segment reporting provides lots of transparency regarding underlying core biz trends. 3) Stable performance in Credit Cards segment driven by 30%+ growth in direct consumer inquiry revenue. 4) Stable organic traffic growth on O&O websites: Bankrate.com & CreditCards.com traffic +28% & +16% Y/Y, as GMs expanded Y/Y, highlighting brand awareness advantage. 5) Hints of share repo’s: Mgmt noted a shareholder-friendly capital allocation strategy in the works. Negatives: 1) Ongoing softness in Banking & Insurance segments: combined account for 30% of revs, and declined 8% and 3% Y/Y, respectively, highlighting product, technology, and macro challenges. 2) Ongoing declines in low-margin affiliate biz & Display ad revs: roughly 32% of biz in total, declining ~10-15% Y/Y.

He added, "RATE shares were up as much as 30% after-hours today. We think expectations were fairly low heading into RATE’s 1st earnings print since the SEC investigation. RATE’s segment disclosure provides clarity around its pockets of strength (Credit cards, Caring.com) and weakness (Banking, Insurance, affiliate biz). At $10, RATE shares are trading at 8x ‘15E EBITDA & 12% FCF yield. RATE operates in a large Fin Services Advertising TAM & has a track-record of double-digit revenues & 30%+ EBITDA margins. So, we’ll maintain our Outperform. Evidence of weakness in Banking & Insurance could make us Bearish and evidence of progress in Affiliate & Display revs could make us Bullish..."

For an analyst ratings summary and ratings history on Bankrate click here. For more ratings news on Bankrate click here.

Shares of Bankrate closed at $8.97 yesterday.

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