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RCII Expands Share Buyback Program

Zacks Equity Research

Rent-A-Center Inc. (RCII) announced that it has enhanced its current share repurchase authorization to $1.25 billion from $1 billion.

Since the inception of the share buyback program, the company has repurchased 31,585,314 shares for approximately $794.8 million. Moreover, it bought back 465,035 shares for approximately $17.4 million during the last reported quarter.

The announcement comes at a perfect time when the company badly needs to restore the confidence of its investors in the stock, following its disappointing first-quarter performance.

Earlier last week, Rent-A-Center delivered first-quarter 2013 earnings of 80 cents a share that missed the Zacks Consensus Estimate of 85 cents, and dropped 8% from 87 cents earned in the prior-year quarter.  Total revenue fell 1.9% to $819.3 million from the year-ago quarter and fell short of the Zacks Consensus Estimate of $850 million.

Rent-A-Center’s gross profit tumbled 1.7% to $550.7 million, while gross margin expanded 10 basis points to 67.2%. Operating profit fell 13.9% to $79.3 million, whereas operating profit margin contracted 130 basis points to 9.7%. Adjusted EBITDA decreased 11.4% to $98.6 million, while adjusted EBITDA margin shriveled 130 basis points to 12%.

Following its sluggish performance, Rent-A-Center now projects 2013 top-line growth of 3.5% to 5.5%, attributable to a contribution of $540 million from the RAC Acceptance business. Management forecasts comparable-store sales growth ranging from 1% – 2% for 2013.

Earlier, Rent-A-Center had expected total revenue growth of 5% to 8%, and comps increase of 2% to 4% in 2013.

Management now envisions 2013 earnings in the band of $2.95 to $3.10 per share, including a cost of 25 cents related to its international expansion initiatives. Earlier, management had projected 2013 earnings between $3.25 and $3.40 per share. Management also forecasted a 50 basis points contraction in gross profit and operating margins for 2013.

Following the company’s trimmed outlook, shares of Rent-A-Center maintain a Zacks Rank #4 (Sell).

Other Stocks to Consider

Until any further upgrade on the Zacks Rank of Rent-A-Center, other stocks worth considering in the finance-leasing industry are AeroCentury Corp. (ACY), KCAP Financial, Inc. (KCAP) and American Capital, Ltd. (ACAS), all holding a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on RCII

Read the Full Research Report on ACAS

Read the Full Research Report on ACY

Read the Full Research Report on KCAP

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