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Factors Likely to Decide Aaron's (AAN) Fate in Q3 Earnings

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Aaron’s, Inc. (AAN - Free Report) is scheduled to report third-quarter 2019 results on Nov 4.

We note that the company has a mixed record of earnings surprise in the trailing four quarters, with a beat in the preceding two quarters. It delivered average positive earnings surprise of 3.2% in the last four quarters. Let’s see how things are shaping up for this announcement.

Which Way Are Estimates Heading?

The Zacks Consensus Estimate for Aaron’s third-quarter earnings is pegged at 82 cents, indicating growth of 18.8% from the prior-year quarter. Notably, the consensus mark has been unchanged over the past 30 days.

Aaron's, Inc. Price and EPS Surprise

 

Aaron's,  Inc. Price and EPS Surprise

Aaron's, Inc. price-eps-surprise | Aaron's, Inc. Quote

For quarterly revenues, the consensus estimate stands at $980.3 million, suggesting an increase of roughly 2.9% from the prior-year quarter’s reported figure. Moreover, the Zacks Consensus Estimate for third-quarter revenues for the company’s Progressive and Aaron’s Business segments stand at $533 million and $441 million, respectively. These suggest growth of 5.8% and 0.5% from the year-ago period’s reported numbers.

Factors at Play

Strength in Aaron’s Progressive segment on higher invoice volume and solid customer base is likely to have driven third-quarter 2019 performance. In addition, the quarterly results might reflect the company’s efforts to bring sustainable growth across the Aaron’s Business segment.

The company remains committed to making investments for improving customer experience, operating efficiencies, compliance and employee engagement. Also, its efforts to expand the next-generation store concept — including renovation and reposition of certain existing stores — are likely to have driven higher in-store traffic and overall revenues. Furthermore, sales across the company’s e-commerce site (Aarons.com) are expected to have boosted the top line in the third quarter.

Meanwhile, Aaron’s same-store sales (comps) in the third quarter are likely to have been driven by improvement in pricing, product mix and business transformation initiatives. The Zacks Consensus Estimate for comps is pegged at growth of 0.2% for the quarter to be reported, whereas the company reported flat comps in the year-ago quarter.

However, higher write-offs and ongoing investments associated with transformation initiatives might have impacted the company’s EBITDA in the third quarter. Increase in write-offs —stemming from rise in the number and type of promotional offerings, store closures, higher ticket leases and an increasing mix of e-commerce as a percent of revenues — is expected to have affected the company’s performance in the quarter. This increase in write-offs is expected to lead to elevated operating expenses, which might show on the company’s operating income and profitability.

What the Zacks Model Predicts

Our proven model does not conclusively predict an earnings beat for Aaron’s this time around. 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. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Aaron’s carries a Zacks Rank #2, its Earnings ESP of 0.00% makes 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:

Papa John's International, Inc (PZZA - Free Report) currently has an Earnings ESP of +30.44% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tecnoglass Inc (TGLS - Free Report) has an Earnings ESP of +14.05% and a Zacks Rank #3 at present.

CarMax, Inc (KMX - Free Report) currently has an Earnings ESP of +5.53% and a Zacks Rank #3.

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