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Rentrak Promoted to Strong Buy

Zacks Equity Research

On Mar 8, Zacks Investment Research upgraded Rentrak Corporation (RENT) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Rentrak’s earnings estimate moved up following better-than-expected fiscal third quarter earnings results and long-term revenue outlook. This business service provider delivered positive earnings surprises in 2 of the last 3 quarters with an average beat of 31.2%. The long-term expected earnings growth rate for this stock is 25%    

Rentrak reported fiscal third-quarter (ended Dec 31, 2013) results on Feb 6. Though loss was incurred at 3 cents per share, it was narrower than the Zacks Consensus Estimate loss. This enabled the company to post a positive surprise of 76.9%.

Revenues at Rentrak improved 27% year over year on the strength of 35% higher contribution from the Advanced Media and Information (:AMI) segment and 17% higher sales from the Home Entertainment business.

Cash from operations in the third quarter totaled $5.0 million, up 67% year over year.  

Rentrak expects revenues to improve considerably aiding earnings improvement going forward. It estimates revenue growth from TV business to be about 80% over the long term with break-even operating income in the next quarter. Box Office business revenues are projected to increase 12% annually while OnDemand Everywhere business revenues should improve 20% in the next few years. The company also estimates 7–10% improvement in Home Entertainment revenues for fiscal 2014.

Following a solid fiscal third quarter, the Zacks Consensus Estimate loss for fiscal 2014 was trimmed by a cent to a loss of 17 cents over the last 30 days. The Zacks Consensus Estimate for fiscal 2015, on the other hand, improved by a substantial 200% to earnings of 96 cents over the same time frame.

Other Stocks to Consider

Other players in the business service industry, which look attractive at current levels, include SouFun Holdings Ltd.  (SFUN), ExamWorks Group, Inc. (EXAM) and Viad Corp. (VVI). While SoFoun sports the same Zacks Rank as Rentrak, ExamWorks and Viad Corp. carry a Zacks Rank #2 (Buy).

Read the Full Research Report on RENT
Read the Full Research Report on EXAM
Read the Full Research Report on VVI
Read the Full Research Report on SFUN

Zacks Investment Research