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Will Rent-A-Center (RCII) Disappoint This Earnings Season?


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Rent-A-Center, Inc. (RCII - Analyst Report), the specialty retailer that leases household durable merchandise to consumers on a rent-to-own basis, is set to report fourth quarter and full-year 2013 results on Jan 27, 2014. Last quarter, it posted a negative surprise of 19.1%. Let us see how things are developing for this announcement.

Factors in the Past Quarter

The persistent deflation in electronic products along with promotions undertaken to attract budget-constrained consumers led to the dismal results. Further, rise in rentals and fees costs as well as salaries and other expenses kept margins under pressure in the last quarter.

Earnings Whispers

Our proven model does not conclusively project Rent-A-Center as likely to beat earnings this quarter. That is because 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:  ESP for Rent-A-Center is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 76 cents.

Zacks #3 Rank (Hold) : Rent-A-Center’s Zacks Rank #3 (Hold) lowers the predictive power of ESP because this Zacks Rank when combined with a 0.00% ESP makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into an earnings announcement, especially when the company is witnessing negative estimate revisions momentum.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows these to have the right combination of elements to post an earnings beat:  

McGraw Hill Financial, Inc. (MHFI - Analyst Report) with Earnings ESP of +1.27% and a Zacks Rank #2 (Buy)

Michael Kors Holdings Limited (KORS - Analyst Report) with Earnings ESP of +1.15% and a Zacks Rank #2 (Buy)

The Walt Disney Co. (DIS - Analyst Report) with Earnings ESP of +3.33% and a Zacks Rank #3 (Hold)

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