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Aaron's (AAN) to Report Q2 Earnings: What's in the Cards?

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Aaron’s, Inc. (AAN - Free Report) is scheduled to report second-quarter 2019 results on Jul 25. The company surpassed the Zacks Consensus Estimate in two of the trailing four quarters, with average beat of 4.4%. 

Further, the Zacks Consensus Estimate for second-quarter earnings is pegged at 88 cents, indicating a rise of 4.8% from the year-ago quarter’s reported figure. We note that the Zacks Consensus Estimate remained stable over the past 30 days.

Factors at Play

The company’s Aaron’s business is progressing well with its transformational initiatives over the past few years. With plans to invest in activities to improve customer experience, operating efficiencies, compliance and employee engagement, the segment is likely to get back on growth trajectory. Also, efforts like renovating certain existing stores and repositioning others to more attractive store locations are key drivers helping the segment increase in-store traffic and revenues. 

In fact, the consensus estimate for second-quarter revenues for the Aaron’s business segment is pegged at $446 million, implying growth of 2.5% from the year-ago quarter’s reported figure. 

Additionally, strength in the Progressive segment, which covers the virtual lease-to-own business, over the last several quarters has been aiding performance. This segment is benefiting from robust growth in invoice volumes and a solid customer base.

Notably, the segment has been consistently generating strong profits and revenues, which have doubled from $1 billion in 2015 to $2 billion in 2018. The company expects momentum for the segment to continue in 2019, with estimated revenues of $2,100-$2,175 million and adjusted EBITDA of $260-$275 million.

The Zacks Consensus Estimate for second-quarter revenues for the Progressive segment stands at $518 million, suggesting growth of 7% from the figure reported in the year-ago period.

Driven by momentum in these segments, the consensus mark for the company’s total revenues in the second quarter is pegged at $968.1 million, indicating  growth of 4.3% from the year-ago quarter’s reported figure.

However, higher write-offs and ongoing investments associated with business transformation initiatives are likely to remain a drag on EBITDA. In the first quarter, the company witnessed increase in write-offs due to a rise in the number and type of promotional offerings, store closures, higher ticket leases, and an increasing mix of e-commerce as percentage of revenues. Moreover, higher write-offs led to elevated adjusted operating expenses.

Aaron's, Inc. Price and EPS Surprise

A Glance at the Zacks Model

Our proven model does not conclusively show that Aaron’s is likely to beat earnings estimates in the second quarter. A stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Aaron has a Zacks Rank #1 but an Earnings ESP of 0.00%, making surprise prediction difficult.

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:

TJX Companies (TJX - Free Report) has an Earnings ESP of +4% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stitch Fix (SFIX - Free Report) has an Earnings ESP of +29.63% and a Zacks Rank #2.

Dave & Buster’s Entertainment (PLAY - Free Report) has an Earnings ESP of +8.31% and a Zacks Rank #3.

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