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Aaron's Up 18% in a Year: Solid Progressive Unit Aids Growth

Aaron's, Inc. AAN has been performing well, thanks to its Progressive segment that continues to witness sturdy momentum for quite a long time. Notable improvement at Aaron’s Business division is also bolstering the company’s performance. As a result, the company reported earnings beat in seven of the trailing 10 quarters, with sales exceeding estimates for the seventh straight quarter.

In a year’s time, shares of this leading lease-purchase solutions provider have advanced 18%, comfortably outperforming the industry’s 6.7% growth. Further, the company’s VGM Score of A with a Zacks Rank #3 (Hold) increases investor's optimism on the stock.

Robust Progressive Segment

Aaron’s Progressive segment, which contributed nearly 52.9% to total revenues in the third quarter of 2018, has been significantly driving the company’s results. The division includes the virtual lease-to-own business. Impressive growth in the number of active doors, invoice volume and a solid customer base are the key catalysts behind the segment’s quarterly performance.

In the last reported quarter, Progressive revenues surged 26.6% year over year. This uptick was backed by 26% rise in invoice volume owing to a 3.8% improvement in active doors and 21.4% growth in invoice volumes per active door. As of Sep 30, 2018, this division had 808,000 customers, up 19.7% year over year. The segment’s adjusted EBITDA also registered 31.6% growth, with margin expansion of 40 basis points.

Aaron’s impressive performance also led to an upbeat outlook for the segment. For 2018, revenues at the Progressive division are estimated to be $1.99-$2.02 billion, significantly up from $1.57 billion in 2017. EBITDA is estimated to be $217.5-$222.5 million, up from $187.8 million last year.

Solid momentum in the company’s Progressive division is expected to boost Aaron’s top- and bottom-line performance in 2018. Revenues are projected to come in between $3.80 billion and $3.86 billion, up from $3.38 billion recorded last year. Management envisions 2018 earnings of $3.30-$3.45 per share, reflecting a sharp increase from $2.56 earned in 2017.

Dividend Hike

Aaron’s remains committed to boost shareholders’ value through share repurchases and dividend payouts. Recently, management has approved a quarterly dividend hike of 16.7% to 3.5 cents per share. The raised dividend is payable Jan 7, 2019, to its shareholders of record as on Dec 20, 2018. Notably, this marks the company’s sixteenth straight year of dividend hike.

Further, the company repurchased 675,552 shares for $31.6 million in the third quarter of 2018. With this, Aaron’s had an authorization to repurchase $400 million.

Some Better-Ranked Retail Stocks

Boot Barn Holdings, Inc. BOOT has an expected long-term earnings growth rate of 23% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Abercrombie & Fitch Co. ANF outpaced the earnings estimates in each of the trailing four quarters, the average being 88.6%. Further, the company carries a Zacks Rank #2 (Buy).

Systemax Inc. SYX is also a Zacks Ranked #2 stock, which delivered a positive earnings surprise of 14.7%.

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