Rent-A-Center, Inc. (RCII), leading rent-to-own store operator, is slated to report third-quarter 2014 results on Oct 21, after the closing bell. In the last quarter, earnings per share came in line with the Zacks Consensus Estimate of 38 cents. Let’s see how things are shaping up for this announcement.
Factors Influencing This Past Quarter?
Management anticipates macroeconomic headwinds in the back half of the year to soften demand in the Core U.S. segment. However, the company’s Acceptance Now business model is gaining traction, which might bring some relief.
On the one hand, customers see rent-to-own as a more flexible and viable option, due to persistent tightening of the credit market, while at the same time, sluggish recovery may make customers reluctant to enter new rental-purchase deals. For this quarter, Rent-A-Center projects top-line as well as comparable-store sales growth in the range of 2% to 3%.
Earnings Whispers
Our proven model does not conclusively show that Rent-A-Center is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here as you will see below:
Zero Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both stand at 46 cents.
Zacks Rank: Rent-A-Center carries a Zacks Rank #2 (Buy). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
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:
The Kroger Co. (KR) has an Earnings ESP of +3.28% and a Zacks Rank #2.
L Brands, Inc. (LB) has an Earnings ESP of +3.13% and a Zacks Rank #2.
Chipotle Mexican Grill, Inc. (CMG) has an Earnings ESP of +0.52% and a Zacks Rank #2.
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