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Bull of the Day: Rent-A-Center (RCII)

Madeleine Johnson

Rent-A-Center (RCII) is a rent-to-own industry leader based in Plano, Texas that provides consumer electronics, appliances, computers, furniture, and accessories under flexible rental purchase agreements with no long-term obligation.

Solid Q2 Results

Back in August, Rent-A-Center reported earnings of 60 cents a share, which beat the Zacks Consensus Estimate thanks to low operating expenses and reduced interest expenses during the quarter. Total revenue reached $655.9 million, while same-store sales grew 5.8%, marking the 10th straight quarter of comps improvement.

Revenues at RCII’s Core U.S. segment declined around 1% to $451.1 million, but the decrease was offset by the company’s strong comps performance. And thanks to its refranchising efforts (Rent-A-Center is selling off over 80 locations), Franchising revenues surged to $14.9 million.

As a result, management lifted its view for fiscal 2019, and now expects same-store sales growth in the mid-single digits and consolidated revenues to improve.

RCII is On the Rise

Rent-A-Center, Inc. Price and Consensus

Shares of Rent-A-Center have soared this year, gaining roughly 56% compared to the S&P 500’s return of roughly 15.3%. Earnings estimates have also been rising, and RCII is now a Zacks Rank #1 (Strong Buy).

For the current fiscal year, seven analysts have revised their earnings estimate upwards in the last 60 days, and the Zacks Consensus Estimate has risen 19 cents from $2.08 to $2.27; earnings could see almost 115% year-over-year growth. 2020 looks pretty strong too, with earnings and revenue expected to continue positive year-over-year growth.

RCII currently trades around 11.4X its forward full-year earnings estimates, a discount compared to the broader Consumer Discretionary market. Investors may see further upside to shares if Rent-A-Center continues to improve its financial position and expand its digital growth initiatives.

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