It has been about a month since the last earnings report for Rent-A-Center . Shares have added about 10.5% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Rent-A-Center Q3 Earnings Beat Mark, Revenues Fall Y/Y

Rent-A-Center posted better-than-expected results for third-quarter 2022. Both the top and the bottom line surpassed the Zacks Consensus Estimate but declined on a year-over-year basis. Management issued soft guidance for the fourth quarter.

Q3 in Detail

Rent-A-Center posted adjusted earnings of 94 cents a share, surpassing the Zacks Consensus Estimate of 88 cents. However, the bottom line decreased significantly from $1.52 earned in the year-ago quarter.

Total revenues of $1,024 million came above the Zacks Consensus Estimate of $1,009 million. However, the metric fell 13.3% year over year, mainly due to lower merchandise sales and a fall in rental revenues in the Acima and the Rent-A-Center Business units. Also, soft sales across all the segments except for Mexico and same-store sales hurt the metric.

Adjusted EBITDA came in at $115 million, down 34.6% from the year-ago period’s level, mainly due to lower revenues and increased loss rates compared with the respective prior-year readings, somewhat offset by reduced costs in the present period. Adjusted EBITDA margin contracted 370 basis points year over year to 11.2%.

Segmental Performance

Revenues at the Rent-A-Center Business segment dipped 5.4% to $473.8 million due to a same-store sales decline of 5.3%. Same-store sales fell due to lower rental and fee revenues. On a two-year stacked basis, same-store sales increased 7%. E-commerce accounted for 23% of the quarterly revenues compared with 21% in the prior-year period. At the end of the reported quarter, the segment’s lease portfolio value slipped 1.7% year over year. As of Sep 30, 2022, the segment had 1,848 company-operated locations.

Revenues at the Acima segment (formerly known as the Preferred Lease segment) declined 19.1% from the prior-year quarter’s level to $504.4 million, mainly due to lower rental and fees revenues, and merchandise sales. Also, gross merchandise volume (GMV) declined 23% due to declines in lease applications from the year-ago period’s level.

Mexico segment’s revenues totaled $16 million, up 1.9% on a constant-currency basis. Also, the segment’s same-store sales rose 0.2%. As of Sep 30, the unit had 125 company-operated locations.

Franchising revenues tumbled 27.4% to $29.7 million. As of Sep 30, Rent-A-Center had 452 franchise-operated locations.

Other Financial Aspects

Rent-A-Center ended the reported quarter with cash and cash equivalents of $165.6 million, net senior debt of $932 million and a stockholders' equity of $548.2 million. RCII had an outstanding debt of $1.4 billion at the quarter end. RCII ended the quarter with $540 million of liquidity, including $374 million of undrawn revolving credit availability.

During the nine months of 2022, Rent-A-Center generated cash of $412.1 million from operations and a free cash flow of $106.1 million, including acquisitions and divestitures. Capital expenditures totaled $18.5 million in the third quarter.
 
In the third quarter of 2022, management returned $50.7 million of cash to its shareholders via dividends and share repurchases. In the reported quarter and during October, RCII bought back 3.537 million shares.

Outlook

Management issued guidance for the fourth quarter of 2022. For the same quarter, management anticipates consolidated revenues of $0.975-$1.025 billion. Adjusted EBITDA is projected between $95 million and $110 million, while adjusted earnings per share are envisioned between 65 cents and 85 cents.

In the year-earlier quarter, RCII delivered revenues of $1.17 billion and earnings per share of $1.08.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -16.93% due to these changes.

VGM Scores

Currently, Rent-A-Center has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Rent-A-Center has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Rent-A-Center is part of the Zacks Consumer Services - Miscellaneous industry. Over the past month, H&R Block (HRB Quick QuoteHRB - Free Report) , a stock from the same industry, has gained 11.3%. The company reported its results for the quarter ended September 2022 more than a month ago.

H&R Block reported revenues of $179.99 million in the last reported quarter, representing a year-over-year change of -6.6%. EPS of -$0.99 for the same period compares with -$0.78 a year ago.

For the current quarter, H&R Block is expected to post a loss of $1.48 per share, indicating a change of -45.1% from the year-ago quarter. The Zacks Consensus Estimate has changed -10.7% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for H&R Block. Also, the stock has a VGM Score of A.