It has been about a month since the last earnings report for Rent-A-Center . Shares have lost about 10.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Rent-A-Center due for a breakout? 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 Q4 Sales & Earnings Miss Estimates
Rent-A-Center posted fourth-quarter 2021 results. Both the top and the bottom line missed the Zacks Consensus Estimate but improved on a year-over-year basis. It posted adjusted earnings of $1.08 a share, lagging the Zacks Consensus Estimate of $1.58. Nonetheless, the bottom line rose 4.9% from $1.03 earned in the year-ago quarter.
Consolidated total revenues of $1,171.4 million came below the Zacks Consensus Estimate of $1,201 million. However, the metric surged 63.5% year over year, mainly driven by gains from the buyout of Acima Holdings and solid growth in the Rent-A-Center Business segment. On a pro-forma basis, revenues improved 10.5% on solid organic growth in the Acima and Rent-A-Center Business units.
Adjusted EBITDA came in at $124.4 million, down 22.4% from the year-ago period’s level on a pro-forma basis. Adjusted EBITDA margin contracted 450 basis points to 10.6% due to impacts of higher delinquency and loss rates, supply-chain constraints and inflation rates.
Segmental Performance
Revenues at the Rent-A-Center Business segment rose 9% to $506.2 million owing to same-store sales growth of 10.4%, led by a 17.9% increase in e-commerce sales and a solid lease portfolio performance. However, the increase was partly offset by the impact of refranchising roughly 100 stores in California in the prior-year quarter. As of Dec 31, 2021, the segment had 1,846 company-operated locations.
Revenues at the Acima segment (formerly known as the Preferred Lease segment) surged 204.3% from the prior-year quarter’s level to $611.9 million, mainly buoyed by gains from the Acima buyout. On a pro-forma basis, revenues rose 12.3% and a gross merchandise volume (GMV) improved 5%, driven by growth in merchant partners and lease applications.
Mexico segment’s revenues totaled $15.7 million, up 9.9% on a constant-currency basis. Also, the segment’s same-store sales rose 8.6%. As of Dec 31, the unit had 123 company-operated locations.
Finally, Franchising revenues inched up 2.1% to $37.6 million. This can primarily be attributed to an increased store count from refranchising about 100 California stores in 2020, offset by lower inventory purchases per store. As of Dec 31, Rent-A-Center had 466 franchise-operated locations.
Other Financial Aspects
Rent-A-Center ended the reported quarter with cash and cash equivalents of $108.3 million, net senior debt of $842 million and a stockholders' equity of $825.2 million. RCII had an outstanding debt of $1.6 billion at the quarter end. It ended the quarter with $280.9 million of liquidity, including $172.6 million of undrawn revolving credit availability.
During 2021, Rent-A-Center generated cash of $392.3 million from operations and a negative free cash flow including acquisitions and divestitures of $943.7 million. Capital expenditures totaled $62.5 million in the aforementioned period.
Outlook
Consolidated revenues are projected in the bracket of $4.450-$4.600 billion for 2022 compared with $4.583 billion generated in 2021. Adjusted EBITDA is forecast between $515 million and $565 million, indicating a decline from $611 million recorded a year ago. Adjusted earnings per share are envisioned in the band of $4.50-$5.00, indicating a decline from $5.57 earned last year.
For the first quarter of 2022, management anticipates revenues of $1.125-$1.155 billion. Adjusted EBITDA is projected between $85 million and $100 million while adjusted earnings per share are envisioned in the band of 65-80 cents.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -53.73% 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. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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. It's no surprise Rent-A-Center has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Why Is Rent-A-Center (RCII) Down 10.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Rent-A-Center . Shares have lost about 10.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Rent-A-Center due for a breakout? 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 Q4 Sales & Earnings Miss Estimates
Rent-A-Center posted fourth-quarter 2021 results. Both the top and the bottom line missed the Zacks Consensus Estimate but improved on a year-over-year basis. It posted adjusted earnings of $1.08 a share, lagging the Zacks Consensus Estimate of $1.58. Nonetheless, the bottom line rose 4.9% from $1.03 earned in the year-ago quarter.
Consolidated total revenues of $1,171.4 million came below the Zacks Consensus Estimate of $1,201 million. However, the metric surged 63.5% year over year, mainly driven by gains from the buyout of Acima Holdings and solid growth in the Rent-A-Center Business segment. On a pro-forma basis, revenues improved 10.5% on solid organic growth in the Acima and Rent-A-Center Business units.
Adjusted EBITDA came in at $124.4 million, down 22.4% from the year-ago period’s level on a pro-forma basis. Adjusted EBITDA margin contracted 450 basis points to 10.6% due to impacts of higher delinquency and loss rates, supply-chain constraints and inflation rates.
Segmental Performance
Revenues at the Rent-A-Center Business segment rose 9% to $506.2 million owing to same-store sales growth of 10.4%, led by a 17.9% increase in e-commerce sales and a solid lease portfolio performance. However, the increase was partly offset by the impact of refranchising roughly 100 stores in California in the prior-year quarter. As of Dec 31, 2021, the segment had 1,846 company-operated locations.
Revenues at the Acima segment (formerly known as the Preferred Lease segment) surged 204.3% from the prior-year quarter’s level to $611.9 million, mainly buoyed by gains from the Acima buyout. On a pro-forma basis, revenues rose 12.3% and a gross merchandise volume (GMV) improved 5%, driven by growth in merchant partners and lease applications.
Mexico segment’s revenues totaled $15.7 million, up 9.9% on a constant-currency basis. Also, the segment’s same-store sales rose 8.6%. As of Dec 31, the unit had 123 company-operated locations.
Finally, Franchising revenues inched up 2.1% to $37.6 million. This can primarily be attributed to an increased store count from refranchising about 100 California stores in 2020, offset by lower inventory purchases per store. As of Dec 31, Rent-A-Center had 466 franchise-operated locations.
Other Financial Aspects
Rent-A-Center ended the reported quarter with cash and cash equivalents of $108.3 million, net senior debt of $842 million and a stockholders' equity of $825.2 million. RCII had an outstanding debt of $1.6 billion at the quarter end. It ended the quarter with $280.9 million of liquidity, including $172.6 million of undrawn revolving credit availability.
During 2021, Rent-A-Center generated cash of $392.3 million from operations and a negative free cash flow including acquisitions and divestitures of $943.7 million. Capital expenditures totaled $62.5 million in the aforementioned period.
Outlook
Consolidated revenues are projected in the bracket of $4.450-$4.600 billion for 2022 compared with $4.583 billion generated in 2021. Adjusted EBITDA is forecast between $515 million and $565 million, indicating a decline from $611 million recorded a year ago. Adjusted earnings per share are envisioned in the band of $4.50-$5.00, indicating a decline from $5.57 earned last year.
For the first quarter of 2022, management anticipates revenues of $1.125-$1.155 billion. Adjusted EBITDA is projected between $85 million and $100 million while adjusted earnings per share are envisioned in the band of 65-80 cents.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -53.73% 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. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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. It's no surprise Rent-A-Center has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.