A month has gone by since the last earnings report for Rent-A-Center . Shares have added about 5.6% 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 Q4 Earnings Miss, Revenues Rise Y/Y
Rent-A-Center posted mixed fourth-quarter 2020 results, wherein the top line matched the Zacks Consensus Estimate while bottom line missed the same. However, both the metrics improved on a year-over-year basis. Further, management issued upbeat view for 2021.
Results were driven by robust performance in the company’s business and growth in the retail partner channel in spite of challenges tied to the pandemic. The company has also been making digital investments and is confident of its omni-channel strategy.
Q4 in Detail
Rent-A-Center posted adjusted earnings of $1.03 a share that missed the Zacks Consensus Estimate by a penny. However, the bottom line rose 77.2% from 58 cents earned in the year-ago quarter.
Total revenues of $716.5 million came almost in line with the Zacks Consensus Estimate of $716 million but grew 7.3% year over year. Growth was mainly driven by same-store sales growth in the Rent-A-Center Business segment and higher Preferred Lease revenues, somewhat offset by a lower store count in the Rent-A-Center Business due to refranchising and store-rationalization efforts.
Meanwhile, adjusted EBITDA came in at $97 million, up more than 52% from the year-ago period. We note that adjusted EBITDA margin expanded 400 basis points to 13.5%.
Segment Performance
Revenues at the Rent-A-Center Business segment rose 5.8% to $464.3 million owing to same store sales revenue growth of 13.7% stemming from a 53% increase in e-commerce sales. We note that the company had refranchised nearly 100 stores in California, however this is not reflected in the segment’s revenues. As of Dec 31, 2020, the segment had 1,845 company-operated locations.
Revenues at Preferred Lease segment grew 4.8% from the prior-year quarter to $201.1 million, mainly buoyed by the virtual retail-partner growth, partly mitigated by headwinds related to the availability of products at most of the retail partners. Moreover, invoice volumes rose about 25%, driven by new virtual retail-partner additions along with organic growth across virtual and staffed locations. Management informed that starting the first quarter of 2021, this segment will include the results of the Acima operations effective the date of buyout. This will be referred to as the Acima Segment.
Mexico segment’s revenues totaled $14.3 million, up 11.4% on a constant-currency basis. Also, the segment’s same-store sales rose 4.3%. As of Dec 31, the unit had 121 company-operated locations.
Finally, Franchising revenues jumped 57% to $36.8 million. This can primarily be attributed to increased store count from refranchising of the California stores in 2020 and rise in inventory purchases by franchisees. As of Dec 31, the company had 462 franchise-operated locations.
Other Financial Aspects
Rent-A-Center ended the reported quarter with cash and cash equivalents of $159.4 million, net senior debt of $190.5 million and stockholders' equity of about $592.1 million. Further, it had an outstanding indebtedness of $197.5 million at quarter end. The company ended the quarter with $369 million of liquidity, including $209 million available on its previous revolving credit facility.
Capital expenditures totaled $34.5 million in 2020. The company generated cash of roughly $236.5 million from operations and free cash flow, including acquisitions and divestitures of $215.9 million during 2020.
2021 Outlook
Consolidated revenues are now projected in the bracket of $4.305-$4.455 billion for 2021. Rent-A-Center delivered $2.814 billion in 2020. Further, adjusted EBITDA is now forecast between $570 and $620 million for 2021, while adjusted earnings per share are envisioned in the band of $5-$5.55. The guidance suggests year-over-year growth of 41-57% from $3.53 earned last year. The Zacks Consensus Estimate for 2020 earnings is currently pegged at $3.87, which is likely to witness upward revisions in the coming days. Meanwhile, free cash flow is predicted in the band of $145-$195 million.
For the Rent-A-Center Business segment, management anticipates revenues of $1.830-$1.880 billion and adjusted EBITDA of $375-$395 million.
For the Acima segment, revenues are likely to fall in the band of $2.290-$2.390 billion and adjusted EBITDA in the range of $320-$350 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 36.45% due to these changes.
VGM Scores
At this time, Rent-A-Center has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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 5.6% Since Last Earnings Report?
A month has gone by since the last earnings report for Rent-A-Center . Shares have added about 5.6% 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 Q4 Earnings Miss, Revenues Rise Y/Y
Rent-A-Center posted mixed fourth-quarter 2020 results, wherein the top line matched the Zacks Consensus Estimate while bottom line missed the same. However, both the metrics improved on a year-over-year basis. Further, management issued upbeat view for 2021.
Results were driven by robust performance in the company’s business and growth in the retail partner channel in spite of challenges tied to the pandemic. The company has also been making digital investments and is confident of its omni-channel strategy.
Q4 in Detail
Rent-A-Center posted adjusted earnings of $1.03 a share that missed the Zacks Consensus Estimate by a penny. However, the bottom line rose 77.2% from 58 cents earned in the year-ago quarter.
Total revenues of $716.5 million came almost in line with the Zacks Consensus Estimate of $716 million but grew 7.3% year over year. Growth was mainly driven by same-store sales growth in the Rent-A-Center Business segment and higher Preferred Lease revenues, somewhat offset by a lower store count in the Rent-A-Center Business due to refranchising and store-rationalization efforts.
Meanwhile, adjusted EBITDA came in at $97 million, up more than 52% from the year-ago period. We note that adjusted EBITDA margin expanded 400 basis points to 13.5%.
Segment Performance
Revenues at the Rent-A-Center Business segment rose 5.8% to $464.3 million owing to same store sales revenue growth of 13.7% stemming from a 53% increase in e-commerce sales. We note that the company had refranchised nearly 100 stores in California, however this is not reflected in the segment’s revenues. As of Dec 31, 2020, the segment had 1,845 company-operated locations.
Revenues at Preferred Lease segment grew 4.8% from the prior-year quarter to $201.1 million, mainly buoyed by the virtual retail-partner growth, partly mitigated by headwinds related to the availability of products at most of the retail partners. Moreover, invoice volumes rose about 25%, driven by new virtual retail-partner additions along with organic growth across virtual and staffed locations. Management informed that starting the first quarter of 2021, this segment will include the results of the Acima operations effective the date of buyout. This will be referred to as the Acima Segment.
Mexico segment’s revenues totaled $14.3 million, up 11.4% on a constant-currency basis. Also, the segment’s same-store sales rose 4.3%. As of Dec 31, the unit had 121 company-operated locations.
Finally, Franchising revenues jumped 57% to $36.8 million. This can primarily be attributed to increased store count from refranchising of the California stores in 2020 and rise in inventory purchases by franchisees. As of Dec 31, the company had 462 franchise-operated locations.
Other Financial Aspects
Rent-A-Center ended the reported quarter with cash and cash equivalents of $159.4 million, net senior debt of $190.5 million and stockholders' equity of about $592.1 million. Further, it had an outstanding indebtedness of $197.5 million at quarter end. The company ended the quarter with $369 million of liquidity, including $209 million available on its previous revolving credit facility.
Capital expenditures totaled $34.5 million in 2020. The company generated cash of roughly $236.5 million from operations and free cash flow, including acquisitions and divestitures of $215.9 million during 2020.
2021 Outlook
Consolidated revenues are now projected in the bracket of $4.305-$4.455 billion for 2021. Rent-A-Center delivered $2.814 billion in 2020. Further, adjusted EBITDA is now forecast between $570 and $620 million for 2021, while adjusted earnings per share are envisioned in the band of $5-$5.55. The guidance suggests year-over-year growth of 41-57% from $3.53 earned last year. The Zacks Consensus Estimate for 2020 earnings is currently pegged at $3.87, which is likely to witness upward revisions in the coming days. Meanwhile, free cash flow is predicted in the band of $145-$195 million.
For the Rent-A-Center Business segment, management anticipates revenues of $1.830-$1.880 billion and adjusted EBITDA of $375-$395 million.
For the Acima segment, revenues are likely to fall in the band of $2.290-$2.390 billion and adjusted EBITDA in the range of $320-$350 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 36.45% due to these changes.
VGM Scores
At this time, Rent-A-Center has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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.