It has been about a month since the last earnings report for Rent-A-Center . Shares have added about 12.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Rent-A-Center due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Rent-A-Center’s Q2 Revenues & Earnings Beat Estimates
Rent-A-Center posted sturdy second-quarter 2021 results and raised view for the year. Both the top and the bottom line surpassed the Zacks Consensus Estimate and improved on a year-over-year basis.
Management remains impressed with the quarterly performance on higher same-store sales and a solid lease performance across the company’s Rent-A-Center Business segment. Robust gains from the Acima buyout also led to this upside.
Q2 in Detail
Rent-A-Center posted adjusted earnings of $1.63 a share that beat the Zacks Consensus Estimate of $1.37. Also, the bottom line rose almost 104% from 80 cents earned in the year-ago quarter.
Consolidated total revenues of $1,194 million surpassed the Zacks Consensus Estimate of $1,125 million and surged 74.6% year over year. Growth was mainly driven by gains from the buyout of Acima Holdings and same-store sales growth in the Rent-A-Center Business segment. On a pro-forma basis, revenues grew 21.6% on solid organic growth in the Acima and Rent-A-Center Business units.
We note that adjusted EBITDA came in at $181.9 million, up 41% from the year-ago period’s level on a pro-forma basis. Adjusted EBITDA margin expanded 210 basis points to 15.2% on strong profits in the Rent-A-Center Business and Acima segments.
Segment Performance
Revenues at the Rent-A-Center Business segment rose 10.2% to $505.8 million owing to same-store sales growth of 16.6%, led by a 19% increase in e-commerce sales, a solid lease portfolio performance and positive customer payment trends.
Revenues at Acima segment surged 232.2% from the prior-year quarter’s level to $635.3 million, mainly buoyed by the gains from the Acima buyout. The segment registered gross merchandise volume (GMV) growth of 309.3%. On a pro-forma basis, revenues rose 29.7% and GMV improved 43%, driven by virtual retail partner additions, organic growth in the existing retail partnerships, an increased e-commerce penetration and cycling over soft GMV trends in the year-ago period.
Mexico segment’s revenues totaled $15.3 million, up 23.6% on a constant-currency basis. Also, the segment’s same-store sales rose 9.6%.
Finally, Franchising revenues jumped 65.7% to $37.6 million. This can primarily be attributed to higher store count from refranchising about 100 California stores in 2020 and a rise in inventory purchases by the franchisees.
Other Financial Aspects
Rent-A-Center ended the reported quarter with cash and cash equivalents of $145.1 million, net senior debt of $842 million and a stockholders' equity of $825.2 million. It had an outstanding debt of $1.32 billion at the quarter end. The company ended the quarter with $608 million of liquidity including $463 million of undrawn revolving credit.
Capital expenditures totaled $14 million in the three months ended Jun 30. The company generated cash of $250.5 million from operations and a negative free cash flow including acquisitions and divestitures of $1,048.4 million during the six months ended Jun 30.
The company’s board authorized a new share repurchase program worth nearly $250 million, replacing its previous share buyback plan.
2021 Outlook
Consolidated revenues are now projected in the bracket of $4.550-$4.670 billion for 2021 compared with $4.450-$4.600 billion predicted earlier. Rent-A-Center delivered $2.814 billion in 2020. Adjusted EBITDA is now forecast between $660 million and $700 million compared with the previous projection of $600-$650 million.
Adjusted earnings per share are now envisioned in the band of $5.90-$6.40, up from $5.30-$5.85 expected earlier. The guidance suggests significant growth from $3.53 earned last year. For 2021, free cash flow is predicted in the band of $300-$350 million compared with $250-$300 million estimated previously.
For the Rent-A-Center Business segment, management anticipates revenues of $2.020-$2.060 billion compared with the earlier anticipation of $1.940-$1.990 billion. Adjusted EBITDA is projected between $480 million and $500 million compared with the previous estimate of $405-$425 million.
For the Acima segment, revenues are expected in the band of $2.340-$2.420 billion compared with the earlier guided range of $2.320-$2.420 billion. The segment’s adjusted EBITDA is projected in the range of $330-$350 million compared with the prior forecast of $320-$350 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 8.9% due to these changes.
VGM Scores
Currently, Rent-A-Center has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Rent-A-Center has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is Rent-A-Center (RCII) Up 12.3% Since Last Earnings Report?
It has been about a month since the last earnings report for Rent-A-Center . Shares have added about 12.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Rent-A-Center due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Rent-A-Center’s Q2 Revenues & Earnings Beat Estimates
Rent-A-Center posted sturdy second-quarter 2021 results and raised view for the year. Both the top and the bottom line surpassed the Zacks Consensus Estimate and improved on a year-over-year basis.
Management remains impressed with the quarterly performance on higher same-store sales and a solid lease performance across the company’s Rent-A-Center Business segment. Robust gains from the Acima buyout also led to this upside.
Q2 in Detail
Rent-A-Center posted adjusted earnings of $1.63 a share that beat the Zacks Consensus Estimate of $1.37. Also, the bottom line rose almost 104% from 80 cents earned in the year-ago quarter.
Consolidated total revenues of $1,194 million surpassed the Zacks Consensus Estimate of $1,125 million and surged 74.6% year over year. Growth was mainly driven by gains from the buyout of Acima Holdings and same-store sales growth in the Rent-A-Center Business segment. On a pro-forma basis, revenues grew 21.6% on solid organic growth in the Acima and Rent-A-Center Business units.
We note that adjusted EBITDA came in at $181.9 million, up 41% from the year-ago period’s level on a pro-forma basis. Adjusted EBITDA margin expanded 210 basis points to 15.2% on strong profits in the Rent-A-Center Business and Acima segments.
Segment Performance
Revenues at the Rent-A-Center Business segment rose 10.2% to $505.8 million owing to same-store sales growth of 16.6%, led by a 19% increase in e-commerce sales, a solid lease portfolio performance and positive customer payment trends.
Revenues at Acima segment surged 232.2% from the prior-year quarter’s level to $635.3 million, mainly buoyed by the gains from the Acima buyout. The segment registered gross merchandise volume (GMV) growth of 309.3%. On a pro-forma basis, revenues rose 29.7% and GMV improved 43%, driven by virtual retail partner additions, organic growth in the existing retail partnerships, an increased e-commerce penetration and cycling over soft GMV trends in the year-ago period.
Mexico segment’s revenues totaled $15.3 million, up 23.6% on a constant-currency basis. Also, the segment’s same-store sales rose 9.6%.
Finally, Franchising revenues jumped 65.7% to $37.6 million. This can primarily be attributed to higher store count from refranchising about 100 California stores in 2020 and a rise in inventory purchases by the franchisees.
Other Financial Aspects
Rent-A-Center ended the reported quarter with cash and cash equivalents of $145.1 million, net senior debt of $842 million and a stockholders' equity of $825.2 million. It had an outstanding debt of $1.32 billion at the quarter end. The company ended the quarter with $608 million of liquidity including $463 million of undrawn revolving credit.
Capital expenditures totaled $14 million in the three months ended Jun 30. The company generated cash of $250.5 million from operations and a negative free cash flow including acquisitions and divestitures of $1,048.4 million during the six months ended Jun 30.
The company’s board authorized a new share repurchase program worth nearly $250 million, replacing its previous share buyback plan.
2021 Outlook
Consolidated revenues are now projected in the bracket of $4.550-$4.670 billion for 2021 compared with $4.450-$4.600 billion predicted earlier. Rent-A-Center delivered $2.814 billion in 2020. Adjusted EBITDA is now forecast between $660 million and $700 million compared with the previous projection of $600-$650 million.
Adjusted earnings per share are now envisioned in the band of $5.90-$6.40, up from $5.30-$5.85 expected earlier. The guidance suggests significant growth from $3.53 earned last year. For 2021, free cash flow is predicted in the band of $300-$350 million compared with $250-$300 million estimated previously.
For the Rent-A-Center Business segment, management anticipates revenues of $2.020-$2.060 billion compared with the earlier anticipation of $1.940-$1.990 billion. Adjusted EBITDA is projected between $480 million and $500 million compared with the previous estimate of $405-$425 million.
For the Acima segment, revenues are expected in the band of $2.340-$2.420 billion compared with the earlier guided range of $2.320-$2.420 billion. The segment’s adjusted EBITDA is projected in the range of $330-$350 million compared with the prior forecast of $320-$350 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 8.9% due to these changes.
VGM Scores
Currently, Rent-A-Center has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Rent-A-Center has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.