Cars.com (CARS) is a leading online automotive marketplace. We have utilized the website as both a consumer and as investors in this company. You may recall that Cars.com is a Tegna (TGNA) spinoff. Tegna, whose main business operations are in TV stations and selling advertising, spun off Cars.com back in June 2017.

The spinoff was met with mixed reviews and it was widely believed that the valuation was too high on the company. Well, we initiated a small position in the company at $21 in the fall, and since then the stock has moved higher:

Source: Yahoo finance

But can this momentum continue? In this column we discuss the performance of the name in the most recent quarter, as well as for all of 2017, to get an idea of how the company is trending. Further, we offer our thoughts and projections for 2018 performance.

Not the best Q4

The top line revenues in Q4 2017 were $156.6 million compared to $161.7 million in the prior year period. What is going on here? Well, this reflects softness in the national advertising business, which declined 7% compared as well as advertisers’ shifting spend to programmatic away from interval scheduling.

What is more, not only were revenues down, but operating expenses for Q4 2017 were up to $117.7 million compared to $112.8 million for the prior year period. This increase was driven by a $3.8 million increase in general and administrative expenses, reflecting $2.7 million of incremental public company costs, $0.7 million of non-recurring costs, $0.4 million of write-off of assets and $1.1 million of stock-based compensation expense.

Combining the top line and factoring in expenses, as well as a tax reform benefit, we see that net income was $151.8 million compared to $48.8 million in the fourth quarter of 2016. However, much of this included a big tax benefit of $131.0 million. Factoring in necessary items, adjusted net income was $34.2 million compared to $68.0 million for the prior year period.

Customer metrics  end 2017 soft, improving to start 2018