Don’t tell the stock market, but there have been some signs that the economy is beginning to slow down. While it’s not a broad-based collapse or anything frightening like that, there are some areas experiencing the pinch. Recently, today’s Bear of the Day referenced that pinch in its latest earnings report. It’s currently a Zacks Rank #5 (Strong Sell) and we are going to investigate the reasons why.

I’m talking about RCI Hospitality (RICK Quick QuoteRICK - Free Report) ). RCI Hospitality Holdings, Inc., through its subsidiaries, engages in the hospitality and related businesses in the United States. The company operates through Nightclubs, Bombshells, and Other segments. 

On May 9^th, the company reported non-GAAP EPS of 90 cents on revenues of $72.3 million, with adjusted EBITDA of $17.2 million. Both the EPS and revenue number fell well shy of last year’s numbers. The GAAP EPS of 8 cents was a far departure from the 81-cent number the market was expecting. That marked the fourth consecutive quarterly miss.

There was a bright spot in the quarter though. The company’s CEO commented on the conference call that its Bombshells segment saw “steady sales and better margins on a sequential quarter basis.”

The bad quarter caused analysts to cut their expectations for the current year and next year. The drop in expectations has brought our Zacks Consensus Estimates for the current year down from $4.37 to $3.84 while next year’s number is off from $6.23 to $6.00. Those are on revenue growth of 1.28% this year and 7.51% next year.

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RCI Hospitality is in the Leisure and Recreation Services industry which ranks in the Bottom 41% of our Zacks Industry Rank. There are other stocks within this industry which are in the good graces of our Zacks Rank. These include Zacks Rank #1 (Strong Buy) Royal Caribbean Cruises (RCL Quick QuoteRCL - Free Report) as well as Zacks Rank #2 (Buy) AMC Entertainment (AMC Quick QuoteAMC - Free Report) ).