How Rent-A-Center (RCII) Looks Just Ahead of Q3 Earnings
Rent-A-Center, Inc. RCII is slated to release third-quarter 2017 results on Oct 30. The question lingering in the minds of investors is whether this leading rent-to-own store operator will be able to post positive surprise in the quarter to be reported. Let’s find out.
How are Estimates Shaping Up?
Analysts polled by Zacks expect Rent-A-Center to post a loss of 8 cents a share in the third quarter, wider than a loss of 1 cent reported in the preceding quarter. The estimate also compares unfavorably with the prior-year quarter earnings of 11 cents. The consensus estimate for revenue is pegged at $654.8 million, reflecting a year-over-year decrease of 5.6%. However, the rate of decline is likely to decelerate from 9.6% witnessed in the preceding quarter.
Factors at Play
We remained concerned about Rent-A-Center’s top and bottom-line performance which has been declining year over year, since the past six quarters. Total revenues fell 9.6% year over year during the second quarter, exhibiting decline witnessed across the Core U.S., Mexico and Franchising segments, partially mitigated by growth registered at Acceptance Now segment. The company has been also grappling with soft comparable-store sales performance for quite some time now. In the first and second quarters of 2017, comparable-store sales have declined 7.8% and 7.4%, respectively.
We note that Core U.S. comps declined 4.2% in September following a decline of 5.3% and 5.7% in August and July, respectively. However, Acceptance NOW comps jumped 8.1% after increasing 8.6% and 7.1% in the August and July, respectively.
Nevertheless, Rent-A-Center is concentrating on a new labor model, supply chain initiative and productivity enhancements. These endeavors are directed toward improving the performance of Core U.S. segment, optimizing the Acceptance NOW business along with enhancing distribution channels as well as integrating retail and online offerings. The company is also optimizing product mix, increasing the average ticket price, upgrading workforce, concentrating on lowering delinquency rates and rationalizing existing stores as well as contemplating on new ones.
Rent-A-Center Inc. Price, Consensus and EPS Surprise
Rent-A-Center Inc. Price, Consensus and EPS Surprise | Rent-A-Center Inc. Quote
What Does the Zacks Model Unveil?
Our proven model shows that Rent-A-Center is likely to beat estimates this quarter. A stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. 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 has an Earnings ESP of +73.68%. This makes us reasonably confident that bottom line is likely to outperform the estimate.
Other 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:
Conn's, Inc. CONN has an Earnings ESP of +50.00% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ralph Lauren Corporation RL has an Earnings ESP of +2.63% and a Zacks Rank #2.
Big Lots, Inc. BIG has an Earnings ESP of +15.39% and a Zacks Rank #2.
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