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Will Rent-A-Center (RCII) Miss Q2 Earnings on Soft Business?

Zacks Equity Research

Rent-A-Center Inc. (RCII), the rent-to-own operator, is slated to report its second-quarter 2014 results on Jul 21, 2014. In the last quarter, it posted a positive surprise of 3.6%. Let’s see how things are shaping up for this announcement.

Factors Influencing this Quarter

Rent-A-Center hinted at a soft second-quarter performance. The company held economic headwinds responsible for sluggish demand in the U.S. business segment. Further, management hinted that revenues and earnings for the quarter would fall short of its expectations. Management now projects total revenue at $773 million, while comparable-store sales are likely to register growth of about 0.6%. Management also expects adjusted net earnings in the band of 36 cents to 38 cents a share.

Earnings Whispers?

Our proven model does not conclusively show that Rent-A-Center is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.

Zacks ESP: Earnings ESP for Rent-A-Center is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 38 cents.

Zacks Rank: Rent-A-Center has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements:

Big Lots Inc. (BIG) has an Earnings ESP of +3.33% and a Zacks Rank #2 (Buy).

Williams-Sonoma Inc. (WSM) has an Earnings ESP of +1.89% and a Zacks Rank #2.

Dollar General Corporation (DG) has an Earnings ESP of +1.21% and a Zacks Rank #3 (Hold).

Read the Full Research Report on DG
Read the Full Research Report on RCII
Read the Full Research Report on BIG
Read the Full Research Report on WSM

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