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Upbound Group, Inc. (UPBD - Free Report) , earlier known as Rent-A-Center, posted its first-quarter 2024 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. The company’s revenues increased year over year, while earnings declined.
However, the company highlighted strong execution across strategic initiatives, such as merchant growth, disciplined underwriting and expense management, contributing to its quarterly results. The resilience of its consumer base in stable macroeconomic conditions with persistent inflation supported profitable growth.
Additionally, technological enhancements in underwriting and a focus on customer and retailer relationships have strengthened its market position. Segments like Acima and Rent-A-Center showed notable improvements, with Acima experiencing double-digit growth and Rent-A-Center seeing its first increase in same-store sales in the last eight quarters. The results reflect the company's robust business model and strategic growth outlook.
The stock has rallied 5.1% in the past six months compared with the industry’s growth of 26.3%.
Upbound Group, Inc. Price, Consensus and EPS Surprise
Upbound posted adjusted earnings of 79 cents per share, surpassing the Zacks Consensus Estimate of 77 cents. However, the bottom line dipped from 83 cents in the year-ago quarter.
Total revenues of $1,096 million surpassed the consensus estimate of $1,061 million. The metric increased 7.9% year over year mainly due to growth in rentals and fees revenues, as well as merchandise sales revenues.
Adjusted EBITDA was $109.1 million, down 2.2% year over year. An increase in adjusted EBITDA from the Rent-A-Center segment was negated by a decrease in the same metric from the Acima segment and an increase in corporate expenses.
The Zacks Rank #3 (Hold) company’s adjusted EBITDA margin dropped by 100 basis points (bps) year over year to 10%. This decline was driven by a 260-bps decrease in the Acima adjusted EBITDA margin, coupled with higher corporate costs, which were partially mitigated by a 140-bps increase in the Rent-A-Center adjusted EBITDA margin.
Image Source: Zacks Investment Research
Segmental Performance
Revenues from the Rent-A-Center segment increased 0.2% year over year to $485.8 million due to higher rentals and fees revenues, which were partially offset by a decrease in merchandise sales revenues. Same-store sales increased 0.8% year over year.
This segment’s same-store lease portfolio value was flat to slightly positive year over year. Segmental adjusted EBITDA margin was 16.6%, increasing 140 basis points from the prior year. As of Mar 31, 2024, the unit had 1,836 locations.
The Zacks Consensus Estimate for the Rent-A-Center segment’s revenues was pegged at $481 million for the quarter.
Revenues at the Acima segment (formerly known as the Preferred Lease segment) increased 16% year over year to $561.3 million mainly due to growth in both rentals and fee revenues, as well as merchandise sales revenues. Also, gross merchandise volume increased 19.9% due to an expansion of merchant numbers, merchant productivity and its expanded direct-to-consumer offerings. The segment’s adjusted EBITDA margin decreased 260 bps to 11.6% from 14.2% in the year-ago period.
The Zacks Consensus Estimate for the Acima segment’s revenues was pegged at $535 million for the quarter.
Franchising revenues decreased 5% to $28.3 million primarily due to lower inventory sales. As of Mar 31, 2024, Rent-A-Center had 434 franchise-operated locations.
The Mexico segment’s revenues totaled $20.6 million, up 7.2% on a constant-currency basis. As of Mar 31, 2024, the unit had 131 company-operated locations.
Other Financial Aspects
Upbound ended the reported quarter with cash and cash equivalents of $84.8 million, net senior debt of $848.6 million, and stockholders' equity of $578.3 million.
The company distributed a quarterly dividend of 37 cents per share in the first quarter, an increase from 34 cents per share in the prior-year quarter.
Outlook
The company's strong financial performance in the first quarter is a positive sign for its prospects. It is well-positioned to continue growing in 2024 despite the challenging market conditions.
UPBD expects to generate consolidated revenues of $4-$4.20 billion in 2024. It reported revenues of $4 billion in 2023. Adjusted EBITDA, excluding SBC, is expected between $455 million and $485 million. In 2023, it reported an adjusted EBITDA of $455.7 million.
Adjusted earnings for 2024 are expected to be $3.55-$4 per share, whereas it reported $3.55 in 2023.
The company expects a free cash flow of $100-$130 million for 2024.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. The company sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings and sales indicates growth of 12.5% and 3.3% from the year-ago period’s reported figures. AEO has a trailing four-quarter average earnings surprise of 22.7%.
Abercrombie & Fitch is a specialty retailer of premium, high-quality casual apparel. The company currently flaunts a Zacks Rank of 1. ANF has a trailing four-quarter average earnings surprise of 715.6%.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year earnings and sales indicates growth of 19.1% and 5.6% from the year-ago period’s reported figures.
The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. The company has a Zacks Rank of 2 (Buy) at present.
The Zacks Consensus Estimate for The Gap’s current fiscal-year earnings and sales indicates declines of 0.3% and 4.9% from the year-ago period’s reported figures. GPS has a trailing four-quarter average earnings surprise of 180.9%.
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Upbound (UPBD) Q1 Earnings Beat Estimates, Sales Increase Y/Y
Upbound Group, Inc. (UPBD - Free Report) , earlier known as Rent-A-Center, posted its first-quarter 2024 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. The company’s revenues increased year over year, while earnings declined.
However, the company highlighted strong execution across strategic initiatives, such as merchant growth, disciplined underwriting and expense management, contributing to its quarterly results. The resilience of its consumer base in stable macroeconomic conditions with persistent inflation supported profitable growth.
Additionally, technological enhancements in underwriting and a focus on customer and retailer relationships have strengthened its market position. Segments like Acima and Rent-A-Center showed notable improvements, with Acima experiencing double-digit growth and Rent-A-Center seeing its first increase in same-store sales in the last eight quarters. The results reflect the company's robust business model and strategic growth outlook.
The stock has rallied 5.1% in the past six months compared with the industry’s growth of 26.3%.
Upbound Group, Inc. Price, Consensus and EPS Surprise
Upbound Group, Inc. price-consensus-eps-surprise-chart | Upbound Group, Inc. Quote
Q1 in Detail
Upbound posted adjusted earnings of 79 cents per share, surpassing the Zacks Consensus Estimate of 77 cents. However, the bottom line dipped from 83 cents in the year-ago quarter.
Total revenues of $1,096 million surpassed the consensus estimate of $1,061 million. The metric increased 7.9% year over year mainly due to growth in rentals and fees revenues, as well as merchandise sales revenues.
Adjusted EBITDA was $109.1 million, down 2.2% year over year. An increase in adjusted EBITDA from the Rent-A-Center segment was negated by a decrease in the same metric from the Acima segment and an increase in corporate expenses.
The Zacks Rank #3 (Hold) company’s adjusted EBITDA margin dropped by 100 basis points (bps) year over year to 10%. This decline was driven by a 260-bps decrease in the Acima adjusted EBITDA margin, coupled with higher corporate costs, which were partially mitigated by a 140-bps increase in the Rent-A-Center adjusted EBITDA margin.
Image Source: Zacks Investment Research
Segmental Performance
Revenues from the Rent-A-Center segment increased 0.2% year over year to $485.8 million due to higher rentals and fees revenues, which were partially offset by a decrease in merchandise sales revenues. Same-store sales increased 0.8% year over year.
This segment’s same-store lease portfolio value was flat to slightly positive year over year. Segmental adjusted EBITDA margin was 16.6%, increasing 140 basis points from the prior year. As of Mar 31, 2024, the unit had 1,836 locations.
The Zacks Consensus Estimate for the Rent-A-Center segment’s revenues was pegged at $481 million for the quarter.
Revenues at the Acima segment (formerly known as the Preferred Lease segment) increased 16% year over year to $561.3 million mainly due to growth in both rentals and fee revenues, as well as merchandise sales revenues. Also, gross merchandise volume increased 19.9% due to an expansion of merchant numbers, merchant productivity and its expanded direct-to-consumer offerings. The segment’s adjusted EBITDA margin decreased 260 bps to 11.6% from 14.2% in the year-ago period.
The Zacks Consensus Estimate for the Acima segment’s revenues was pegged at $535 million for the quarter.
Franchising revenues decreased 5% to $28.3 million primarily due to lower inventory sales. As of Mar 31, 2024, Rent-A-Center had 434 franchise-operated locations.
The Mexico segment’s revenues totaled $20.6 million, up 7.2% on a constant-currency basis. As of Mar 31, 2024, the unit had 131 company-operated locations.
Other Financial Aspects
Upbound ended the reported quarter with cash and cash equivalents of $84.8 million, net senior debt of $848.6 million, and stockholders' equity of $578.3 million.
The company distributed a quarterly dividend of 37 cents per share in the first quarter, an increase from 34 cents per share in the prior-year quarter.
Outlook
The company's strong financial performance in the first quarter is a positive sign for its prospects. It is well-positioned to continue growing in 2024 despite the challenging market conditions.
UPBD expects to generate consolidated revenues of $4-$4.20 billion in 2024. It reported revenues of $4 billion in 2023. Adjusted EBITDA, excluding SBC, is expected between $455 million and $485 million. In 2023, it reported an adjusted EBITDA of $455.7 million.
Adjusted earnings for 2024 are expected to be $3.55-$4 per share, whereas it reported $3.55 in 2023.
The company expects a free cash flow of $100-$130 million for 2024.
Key Picks
A few better-ranked stocks are American Eagle Outfitters Inc. (AEO - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and The Gap, Inc. (GPS - Free Report) .
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. The company sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings and sales indicates growth of 12.5% and 3.3% from the year-ago period’s reported figures. AEO has a trailing four-quarter average earnings surprise of 22.7%.
Abercrombie & Fitch is a specialty retailer of premium, high-quality casual apparel. The company currently flaunts a Zacks Rank of 1. ANF has a trailing four-quarter average earnings surprise of 715.6%.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year earnings and sales indicates growth of 19.1% and 5.6% from the year-ago period’s reported figures.
The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. The company has a Zacks Rank of 2 (Buy) at present.
The Zacks Consensus Estimate for The Gap’s current fiscal-year earnings and sales indicates declines of 0.3% and 4.9% from the year-ago period’s reported figures. GPS has a trailing four-quarter average earnings surprise of 180.9%.