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Here Are the Factors Influencing Aaron's (AAN) Q3 Earnings

Zacks Equity Research
·4 min read

Aaron's, Inc. AAN is slated to report third-quarter 2020 results on Oct 29, before market open. Notably, this leading omni-channel provider of lease-purchase solutions has a trailing four-quarter earnings surprise of 13.7%, on average. In the last reported quarter, the company delivered an earnings surprise of 43.9%.

The Zacks Consensus Estimate for third-quarter earnings is pegged at $1.43 per share, implying a 95.9% increase from the year-earlier quarter's reported figure. The consensus mark remained unchanged in the past 30 days. For the third quarter, the Zacks Consensus Estimate for revenues is pegged at $1.01 billion, indicating an improvement of 4.7% from the prior-year quarter’s reported figure.

Factors to Note

Aaron’s has been gaining from improved performance in the Progressive segment, driven by strong invoice growth, efficient operating cost management and sturdy customer payment activities. Encouragingly, management envisions revenues in the Progressive segment to be $575-$585 million along with adjusted EBITDA of $100-$105 million for the third quarter. Moreover, invoice growth is likely to have risen on a sequential basis to the tune of low to mid-single digits in the third quarter.

Further, management noted in its last earnings call that the third quarter started off on a positive note on the back of solid performances across all products and categories as well as a strong customer base and a robust lease portfolio. Consequently, the company predicted third-quarter revenues of $1-$1.02 billion, with adjusted earnings of $1.4-$.15 per share. Also, comps are likely to have been positive in the to-be-reported quarter.

Additionally, the company has been making efforts to revamp the Aaron’s business segment, which is likely to have reflected in the third-quarter revenues and earnings. Its transformational initiatives, including investments in activities to improve customer experience, operating efficiencies, compliance and employee engagement, bode well. Apart from these, strength in Aaron’s e-commerce business has been aiding performance. In fact, the company expected revenues for the Aaron's Business segment of $415-$425 million, with same-store revenue growth of 4-6% and adjusted EBITDA of $43-$48 million.

Overall, management predicted third-quarter revenues of $950-$975 million and adjusted earnings of 80-90 cents per share, on its last reported quarter’s earnings call.

However, effects of uncertainties related to the COVID-19 situation will continue to partly mar results in the third quarter. Although stores have resumed operations, sluggish store traffic islikely to have acted as a headwind in the third quarter.

Aarons, Inc. Price and EPS Surprise

Aarons,  Inc. Price and EPS Surprise
Aarons, Inc. Price and EPS Surprise

Aarons, Inc. price-eps-surprise | Aarons, Inc. Quote

What the Zacks Model Unveils

Our proven model does not conclusively predict a beat for Aaron's this earnings season. 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Aaron's has a Zacks Rank #1 but an Earnings ESP of 0.00%.

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:

Lowes Companies LOW has an Earnings ESP of +2.90% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Target Corporation TGT has an Earnings ESP of +11.29% and a Zacks Rank #2.

CVS Health Corporation CVS has an Earnings ESP of +1.06% and a Zacks Rank #3.

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