Rent-to-own specialty retailer, Aaron's, Inc. (AAN), is set to report its third-quarter 2014 results on Oct 24, 2014. In the last quarter, it posted a positive surprise of nearly 2.8%. Let us see how things are developing for this announcement.
Factors Influencing the Quarter
Although, the company’s top-line for second-quarter 2014 marked a year-over-year improvement due to the acquisition of Progressive business, the continuously deteriorating core operations remain a drag on Aaron’s performance. Also, weakness in the consumer electronics sector and rising competition from online giants remain concerns.
Furthermore, we believe the company’s turnaround initiatives, such as divesting underperforming assets and investing in growth opportunities, will prove time consuming. Therefore, we remain skeptical about Aaron’s third-quarter performance.
Earnings Whispers
Our proven model does not conclusively project Aaron's as likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and Zacks Rank #1 #2 or #3 for this to happen. This is not the case here as you will see below.
Zacks ESP: ESP for Aaron’s is 0.00%. This is because the Most Accurate estimate stands at 38 cents per share, which is in line with the Zacks Consensus Estimate.
Zacks Rank: Aaron’s Zacks Rank #3 (Hold) when combined with a zero ESP makes surprise prediction difficult. We caution against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into an earnings announcement, especially when the company is witnessing negative estimate revisions.
Stocks that Warrant a Look
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat:
The New York Times Company (NYT) has an Earnings ESP of +100% and a Zacks Rank #2 (Buy).
Under Armour Inc.’s (UA) Earnings ESP stands at +2.50% and it carries a Zacks Rank #2.
Jarden Corp. (JAH) with an Earnings ESP of +0.86% holds a Zacks Rank #2.
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