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Will Progressive Leasing Shape Aaron's (AAN) Q2 Earnings?

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Aaron's, Inc. (AAN - Free Report) is likely to register an increase in the top line when it reports second-quarter 2020 numbers on Jul 29, before the market opens. The Zacks Consensus Estimate for revenues is pegged at $985.3 million, indicating an improvement of 1.8% from the prior-year reported figure.

However, the company’s bottom line is expected to decline year over year. The Zacks Consensus Estimate for earnings for the quarter under review has decreased by a couple of cents in the past seven days and is currently pegged at 69 cents. The Zacks Consensus Estimate suggests a decline of 25.8% from the year-ago period’s figure of 93 cents.

Notably, this leading omni-channel provider of lease-purchase solutions has a trailing four-quarter earnings surprise of 4.1%, on average. In the last reported quarter, the company delivered an earnings surprise of 13.3%.

Factors to Note

While the impact of coronavirus outbreak is likely to get reflected in Aaron's second-quarter 2020 results, the overall performance of the company may not be so bad. Notably, both Progressive Leasing and Aaron's Business segments have been on a path of recovery thanks to the resumption of economic activities. This is quite evident from the company’s guidance of second-quarter revenues in the range of $975 million to $1 billion and adjusted earnings between 80 cents and 85 cents a share issued last month.

Coming to the segments, with Progressive's retail partners reopening their stores, invoice volumes have been showing signs of improvement from a low point in April 2020. In fact, the company projected flat to low-single digit decline in invoice volumes in the quarter to be reported faring better than analysts’ expectations. Write-offs for the quarter are expected to be in-line to slightly better compared with the year-ago period.

For the Aaron's Business segment, management guided revenues written into the portfolio to be down about 15% year over year primarily due to the coronavirus-related softness in April 2020. Notably, the company informed that as of May 2020 almost all of the showrooms of company-owned stores were operational. Write-offs for the second quarter are anticipated to improve by as much as 100 basis points relative to year-ago levels.

Additionally, the company forecasts a decline of 1.5-2.5% for second-quarter same-store revenues. This suggests an improvement from a decline of 4.6% in same-store revenues reported in first-quarter 2020.

Aarons, Inc. Price, Consensus and EPS Surprise

Aarons,  Inc. Price, Consensus and EPS Surprise

Aarons, Inc. price-consensus-eps-surprise-chart | Aarons, Inc. Quote

What the Zacks Model Unveils

Our proven model does not conclusively predict a beat for Aaron's this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Aaron's has a Zacks Rank #1 but an Earnings ESP of 0.00%.

Stocks With Favorable Combination

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

Big Lots (BIG - Free Report) has an Earnings ESP of +11.8% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Best Buy (BBY - Free Report) has an Earnings ESP of +44.52% and a Zacks Rank #2.

Costco (COST - Free Report) has an Earnings ESP of +0.76% and a Zacks Rank #3.

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