NEW YORK (TheStreet) -- Shares of KAR Auction Services(KAR) - Get Report are dropping by 2.95% to $36.49 on heavy trading volume late Monday afternoon, before the Carmel, IN-based company posts its 2016 first quarter results tomorrow morning.

Wall Street is expecting the provider of vehicle auction services to report earnings of 50 cents per share on revenue of $694.21 million.

During the same period last year, the company said it had adjusted earnings of 42 cents per diluted share on revenue of $632.4 million.

Sterne Agee has a "buy" rating and $44 price target on the stock ahead of the results.

"Our checks point to softer physical auction volumes at ADESA in 1Q16. Notably, we believe that some commercial cosigners are setting high floor prices relative to the market, driving below-normal conversion rates," the firm wrote in a note earlier today.

Sterne Agee believes these customers are opting for more reconditioning work to ease the impact of lower used vehicle prices, which is leading to elevated inventory levels.

"While this does not change our positive long-term thesis, it will likely alter the cadence of volume/margin trends in 2016, suggesting near-term estimates may be too high," the firm added.

About 2.19 million of the company's shares were traded so far today compared to its average volume of 896,223 shares per day.

Separately, TheStreet Ratings Team has a "Buy" rating with a score of A- on the stock.

The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, notable return on equity and expanding profit margins. The team believes its strengths outweigh the fact that the company has had sub par growth in net income.

Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.

You can view the full analysis from the report here: KAR

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