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Factors Likely to Decide Aaron's (AAN) Fate in Q1 Earnings

Zacks Equity Research

Aaron's, Inc. AAN is scheduled to report first-quarter 2019 results on Apr 25.

The company witnessed a negative earnings surprise in three of the trailing four quarters, the average miss being 3.3%. Nevertheless, the Zacks Consensus Estimate for first-quarter earnings is pegged at 93 cents, indicating a rise of 14.8% from the year-ago reported figure. Estimates remained stable over the past 30 days.

Aaron's, Inc. Price and EPS Surprise

Aaron's, Inc. Price and EPS Surprise | Aaron's, Inc. Quote


How Things Are Shaping Up Prior to 1Q19 Release

Aaron’s Progressive segment, which covers the virtual lease-to-own business, is significantly driving the company’s performance. Robust growth in number of active doors, invoice volume and a solid customer base are the primary reasons behind the segment’s growth. Additionally, the company’s Aaron’s Business segment is witnessing notable improvement backed by the buyout of franchised locations coupled with higher lease revenues and fees. It also remains on track with the transformation of its Aaron’s Business segment. Backed by these positives, the company is expected to deliver solid performance in the to-be-reported quarter.

Notably, the consensus estimate for quarterly revenues is pegged at $997.1 million, indicating growth of 4.4% from the year-ago quarter number. For the Progressive and Aaron’s Business segments, the revenue estimate stands at $538 million and $472 million, respectively. These estimates imply a respective growth of 10.5% and 2.8% from the year-ago quarter figure.

However, Aaron’s has been witnessing soft comparable-store sales (comps) at company-operated stores since the past few quarters. Soft customer count (on a same-store basis) and waning store traffic are hurting comps. This might remain a headwind in the to-be-reported quarter.

A Glance at the Zacks Model

Our proven model does not conclusively show that Aaron’s is likely to beat earnings estimates in the first quarter. A stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Aaron’s Earnings ESP of 0.00% and a Zacks Rank #4 make surprise prediction difficult.

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:

Best Buy Co., Inc. BBY has an Earnings ESP of +1.77% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tractor Supply Company TSCO has an Earnings ESP of +1.09% and a Zacks Rank #3.

Dollar Tree, Inc. DLTR has an Earnings ESP of +0.83% and a Zacks Rank #3.

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