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Factors to Know Ahead of Rent-A-Center's (RCII) Q3 Earnings

Zacks Equity Research

Rent-A-Center, Inc. RCII is scheduled to report third-quarter 2019 numbers on Nov 6, after the market close. We note that in the trailing four quarters, the company’s bottom line has outperformed the Zacks Consensus Estimate by an average of 49.6%. In the last reported quarter, the company delivered a positive earnings surprise of 7.1%.

Factors at Play

Rent-A-Center’s third-quarter bottom line is likely to have benefited from cost-containment efforts, rationalization of store base and lowering of interest expense on account of reduced debt load. Notably, the Zacks Consensus Estimate for third-quarter earnings is currently pegged at 50 cents. Earnings of 32 cents were reported in the year-ago quarter.

Also, the company has been optimizing product mix, increasing the average ticket price, upgrading workforce and concentrating on lowering delinquency rates. These are likely to have favorably impacted the company’s performance in the quarter under review.

Rent-A-Center, Inc. Price, Consensus and EPS Surprise

Rent-A-Center, Inc. Price, Consensus and EPS Surprise

Rent-A-Center, Inc. price-consensus-eps-surprise-chart | Rent-A-Center, Inc. Quote

The acquisition of Merchants Preferred, a provider of virtual rent-to-own services, is likely to have contributed to Acceptance Now business. Although, the Zacks Consensus Estimate for the segment’s revenues indicates a decline of 0.8% to $172 million, the rate of decline suggests a sharp deceleration from 1.5% reported in the second quarter.

Moreover, softness across Core U.S. segment has been a concern. The Zacks Consensus Estimate for Core U.S. segment’s revenues suggests a decline of 3.7% to $435 million.

Cumulatively, decline in revenues across Core U.S. and Acceptance Now segments in the to-be-reported quarter are likely to get reflected in the top line. For revenues, the consensus mark is pegged at $628.3 million, indicating a decline of 2.6% from the figure reported in the year-ago quarter.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Rent-A-Center 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.

Rent-A-Center carries a Zacks Rank #2 and an Earnings ESP of 0.00%.

Stocks Poised to Beat Earnings Estimates

Here are a few companies you may want to consider, as our model shows that these have the right combination to post an earnings beat:

lululemon athletica LULU has an Earnings ESP of +1.54% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Spectrum Brands SPB has an Earnings ESP of +2.60% and a Zacks Rank #3.

Ralph Lauren RL has an Earnings ESP of +0.21% and a Zacks Rank #3.

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Rent-A-Center, Inc. (RCII) : Free Stock Analysis Report
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