Shares of Cars.com Inc. Drop 9% After Falling Short on the Bottom Line

What happened

Shares of Cars.com Inc. (NYSE: CARS), an online marketplace for buying and selling new and used vehicles, are down 9.4% as of 3:30 p.m. EDT Wednesday, after the company's bottom line failed to meet Wall Street estimates during the first quarter.

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So what

Total revenue increased 4%, compared to the prior year, to $160 million, which topped analysts' estimates polled by FactSet calling for $155.3 million. The bottom line was a different story with the company's adjusted earnings checking in at $0.39 per share, far below analysts' estimates of $0.57 per share. Other highlights show some growth in key metrics such as a 9% year-over-year increase in average monthly unique visitors and 22% growth in mobile traffic.

"I am pleased with the rapid progress we have made on our strategic growth initiatives," said Alex Vetter, president and chief executive officer of Cars.com, in a press release. "Our planned marketing investments and product innovations yielded strong unique visitor and traffic growth during the quarter. We are progressing well with converting affiliate markets, as we now work directly with nearly 80% of our dealer customers."

Now what

Management also noted that it saw positive industry response to the Dealer Inspire and Launch Digital Marketing acquisition. Those two acquisitions specialize in advertising and e-commerce spaces and will hopefully give auto dealers more advanced tools to generate sales. While those acquisitions, and likely more down the road, could help Cars.com create a competitive advantage, the first quarter showed that the online automotive marketplace is a tough space to compete in right now.

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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.