Back to top

Image: Bigstock

Rent-A-Center Issues Q4 Preliminary Results; Stock Down

Read MoreHide Full Article

Shares of the leading rent-to-own operator in the U.S., Rent-A-Center, Inc. tanked nearly 12% during after-market trading hours yesterday, after the company issued dismal preliminary guidance for fourth-quarter 2016.

The company now anticipates fourth-quarter Core U.S. same store sales (comps) to decline nearly 14%, while expects Acceptance Now comps to edge up in the range of 1–2%.

Further, Rent-A-Center now expects to report fourth-quarter loss of 20–30 cents per share, on both adjusted and GAAP basis. However, analysts polled by Zacks expect quarterly earnings of 11 cents, which could witness a downtrend in the coming days.

The company had projected 2016 Core revenue in the band of $2,065–$2,100 million and Acceptance Now revenue in the range of $805−$835 million, when it reported third-quarter 2016 results. Moreover, it expected adjusted earnings between $1.05 and $1.15 per share for the full year.

Management informed that the fourth quarter remained quite tough for the company. Also, a recovery from POS system issues at Core Rent-A-Center stores, related to regaining the rental portfolio lost during the past quarters, and account management improvement were slower than anticipated. Though the portfolio improved on a sequential basis, the company’s huge promotional activities affected the quarterly performance.

Bottom Line

We believe that shares of Rent-A-Center are likely to struggle in the near term following its disappointing forecast. The company’s dismal top-line performance has been also hurting the stock for quite some time now. This Zacks Rank #4 (Sell) company’s total revenue has missed the Zacks Consensus Estimate for the fifth straight quarter, when it reported third-quarter results. Further, both the top and the bottom line declined year over year in all the three quarters of 2016.

We observed that Rent-A-Center has not only underperformed the Zacks categorized Consumer Services-Miscellaneous industry, but also the broader sector over the past six months. The stock fell 19.5% compared with the industry's decline of 5%. The broader Consumer Discretionary sector, of which they are part of, gained 5.6% in the same time frame.

Key Picks

Better-ranked stocks in the broader Consumer Discretionary sector include Central Garden & Pet Company (CENT - Free Report) , Caleres, Inc. (CAL - Free Report) and Lululemon Athletica Inc. (LULU - Free Report) , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy)  stocks here.

Central Garden, with a long-term earnings growth rate of 10% skyrocketed 173.3% in the past one year.

Caleres, with a long-term earnings growth rate of 11% gained 22.8% in the past three months.

Lululemon, with a long-term earnings growth rate of 15.9% increased 22.4% in the past one year.

"Zacks’ Best Private Investment Ideas

In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?

Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>"


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Central Garden & Pet Company (CENT) - free report >>

lululemon athletica inc. (LULU) - free report >>

Caleres, Inc. (CAL) - free report >>

Published in