Rent-A-Center Inc. (RCII), one of the largest rent-to-own operators in the U.S., is scheduled to report its first-quarter 2011 financial results after the bell on Monday, April 25, 2011. The current Zacks Consensus Estimate for the quarter is 85 cents a share. For the quarter under review, revenue is $ 753 million, according to the Zacks Consensus Estimate.
Fourth-Quarter 2010, a Synopsis
On January 31, 2011, Rent-A-Center delivered better-than-expected fourth-quarter 2010 results. The quarterly earnings of 71 cents a share, outpaced the Zacks Consensus Estimate of 68 cents, and increased 7.6% from 66 cents registered in the prior-year quarter on the heels of strong demand and effective cost management.
Rent-A-Center’s total revenue, which comprises store and franchise revenues,grew marginally by 0.6% to $ 677.1 million from the year-ago quarter but fell short of the Zacks Consensus Estimate of $ 678 million. Comparable-store sales, excluding financial services revenue, remained flat with the prior-year quarter.
First-Quarter & Fiscal 2011 Guidance
Management now expects first-quarter 2011 earnings in the range of 82 cents to 88 cents a share. Total revenue is expected in the range of $ 745 million to $ 765 million. Rent-A-Center projects comparable-store sales in the range of 1.5% to 2.5%.
For fiscal 2011, earnings are projected between $ 2.90 and $ 3.10 per share. Total revenue is expected in the range of $ 2,868 million to $ 2,928 million. Management expects comparable-store sales between 1.5% and 2.5%.
First-Quarter 2011 Consensus
Analysts considered by Zacks, expect Rent-A-Center to post first-quarter 2011 earnings of 85 cents a share. The current Zacks Consensus Estimate represents a year-over-year growth of 10.4%. The current Zacks Consensus Estimates for the quarter range from a low of 82 cents to a high of 87 cents.
Zacks Agreement & Magnitude
Of the 10 analysts following the stock, none of the analysts revised their estimates either upwards or downwards in the last 30 or 7 days, keeping the current Zacks Consensus Estimate unchanged at 85 cents a share.
Positive Earnings Surprise History
With respect to earnings surprises, Rent-A-Center has topped the Zacks Consensus Estimate over the last four quarters in the range of 4.4% to 16.7%. The average remained at 10.3%. This suggests that Rent-A-Center has beaten the Zacks Consensus Estimate by an average of 10.3% in the trailing four quarters. Given the past performance we expect the company to outperform the Zacks Consensus Estimate.
Rent-A-Center Holds Zacks #2 Rank
Currently, we have a ‘Neutral’ rating on the stock. However, Rent-A-Center holds a Zacks #2 Rank, which translates into a short-term ‘Buy’ recommendation.
Rent-A-Center leverages an extensive network of approximately 3,000 stores to effectively penetrate its target markets, and gain a competitive advantage over its competitors, such as Aaron’s Inc. (AAN), and Advance America.
The company is taking prudent steps to optimize rental merchandise levels in accordance with the sales trends. Rent-A-Center has implemented a centralized inventory management system, including automated merchandise replenishment and a new centralized purchasing system that allows it to better manage its rental merchandise.
The company in order to make a consumer’s shopping experience enjoyable is working on a new business model called RAC Acceptance. When the consumer is denied credit financing for a particular product from the retailer, Rent-A-Center under its RAC Acceptance program, acquires that product from the retailer and offers it to the consumer under a rental-purchase transaction.
Rent-A-Center remains optimistic about its future growth as it opens stores in international markets and accelerates the rollout of RAC Acceptance kiosks.
Rent-A-Center offers consumer electronics, appliances and furniture products under rental purchase schemes that allow the customer to own the merchandise on the completion of the rental period. Due to the continued tightening of the credit market, customers see rent-to-own as a more flexible and viable option compared to credit. However, the sluggish recovery and a fragile job market may make customers reluctant to even enter new rental purchase deals.
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