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Factors Setting the Tone for Rent-A-Center (RCII) Q4 Earnings


Rent-A-Center, Inc. RCII is slated to release fourth-quarter 2017 results on Feb 20. The question lingering in the minds of investors is whether this leading rent-to-own store operator will be able to deliver a positive surprise in the quarter to be reported. Let’s delve deeper into the factors driving this stock’s performance.

How are Estimates Shaping Up?

Analysts polled by Zacks expect Rent-A-Center to incur a loss of 7 cents a share in the fourth quarter, narrower than a loss of 15 cents in the preceding quarter. The estimate compares unfavorably with the prior-year quarter earnings of 9 cents. Meanwhile, the consensus mark for revenues is pegged at $658.5 million, reflecting a year-over-year decrease of 3.7%. However, the rate of decline is likely to decelerate from 7.2% witnessed in the preceding quarter.

Factors at Play

We remained concerned about Rent-A-Center’s top- and bottom-line performance, which has been declining year over year since the past seven quarters. Also, it has been grappling with soft comparable-store sales performance for quite some time now. Analysts surveyed by Zacks expect Core U.S., Acceptance Now and Mexico segments sales to be down 2.3%, 5.9% and 0.9% to $462 million, $182 million and $11.3 million, respectively.

Nevertheless, Rent-A-Center is concentrating on a new labor model, supply chain initiative and productivity enhancements. These endeavors are directed toward improving the performance of Core U.S. segment, optimizing the Acceptance NOW business along with enhancing distribution channels, and integrating retail and online offerings. Additionally, the company is optimizing product mix, increasing the average ticket price, upgrading workforce, concentrating on lowering delinquency rates and rationalizing existing stores, besides contemplating on new ones.

Rent-A-Center Inc. Price, Consensus and EPS Surprise

What Does the Zacks Model Unveil?

Our proven model shows that Rent-A-Center is likely to beat estimates this quarter. A stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Rent-A-Center has a Zacks Rank #3 and an ESP of +21.43%. This makes us reasonably confident that bottom line is likely to outperform the estimate.

Stocks Poised to Beat Earnings Estimates

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

Party City Holdco Inc. PRTY has an Earnings ESP of + 9.02% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Emerald Expositions Events, Inc. EEX has an Earnings ESP of +11.77% and a Zacks Rank of #2.

Weight Watchers International, Inc. WTW has an Earnings ESP of +6.45% and a Zacks Rank #3.

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