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How Rent-A-Center (RCII) Looks Just Ahead of Q4 Earnings

Zacks Equity Research

Rent-A-Center, Inc. RCII is likely to register a substantial improvement in the bottom line when this rent-to-own operator reports fourth-quarter 2018 numbers. Notably, this Texas-based company had reported higher earnings in the preceding two quarters and also comfortably surpassed the Zacks Consensus Estimate both times.

Drawing focus back on to-be-reported fourth quarter, the Zacks Consensus Estimate for earnings is currently pegged at 19 cents, reflecting a significant improvement from a loss of 41 cents reported in the year-ago period. We note that the Zacks Consensus Estimate has remained stable in the last 30 days. The Zacks Consensus Estimate for revenues is pegged at $654.5 million, up about 2.4% from the year-ago quarter.

Factors Likely to Influence the Performance

Rent-A-Center, which terminated the merger plan with Vintage Capital, is focused on enhancing its omni-channel platform so that customers can experience a seamless approach across channels, markets, retailers, products and brands. In doing so, it is increasing e-commerce offerings and mobile applications, and leveraging cloud-based point-of-sale platform to manage orders more efficiently, lower losses and cut operating costs.

Markedly, the company’s cost-saving initiatives are tracking ahead schedule, making it hopeful of generating annual run-rate savings of more than $100 million and savings of roughly $70 million in 2018.

The company’s Acceptance Now business model is also gaining traction. Notably, comparable-store sale at the Acceptance Now segment improved 6.7% during the third quarter of 2018. Overall comparable-store sale for the second quarter grew 5.7%. The Zacks Consensus Estimate for the metric is currently pegged at 6.3% for the fourth quarter.

Management intends to focus more on cost containment endeavors, improving traffic trends, targeted value proposition, refranchising program and augmenting cash flow. Further, the company is rationalizing store base and lowering debt load.

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 Say?

Our proven model does not conclusively show 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 has a Zacks Rank #1 but an Earnings ESP of 0.00%. Consequently, making surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favourable Combination

Here are some better-ranked companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Foot Locker FL has an Earnings ESP of +2.78% and a Zacks Rank #2.

Walmart WMT has an Earnings ESP of +5.55% and a Zacks Rank #3.

Home Depot HD has an Earnings ESP of +0.71% and a Zacks Rank #3.

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