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Aaron's Company, Inc. reported its first quarterly earnings after its planned separation from the parent company on Dec 1, 2020. The company’s fourth-quarter 2020 top and bottom lines outpaced the Zacks Consensus Estimate.
Moreover, adjusted earnings grew year over year. The company is benefiting from investments in customer servicing platforms, decisioning technologies, new store formats and the fast-growing digital business, which are aiding momentum in financial performance and lease portfolio growth.
Shares of the Zacks Rank #2 (Buy) company have gained 10.3% year to date, outperforming the industry’s 13.3% growth.
Q4 Highlights
Aaron's delivered adjusted earnings of 79 cents per share, which surpassed the Zacks Consensus Estimate of 78 cents. The bottom line also advanced 11.3% from 71 cents earned in the prior-year quarter.
On a GAAP basis, the company recorded earnings of 8 cents per share compared with 91 cents earned in the year-ago quarter.
Consolidated revenues declined 1.1% to $430.2 million but beat the Zacks Consensus Estimate of $424 million. The year-over-year revenue decline can be attributed to the net closure of 75 company-operated stores in 2020, partly negated by strength in customer payment activity. Moreover, same-store revenues rose 3.4% in the fourth quarter. Further, e-commerce lease revenues were up 39%.
Breaking up the components of consolidated revenues, we note that lease and retail revenues dipped 0.4% in the reported quarter to $386.9 million. Non-retail sales, which mainly include merchandise sales to franchisees, fell 15.2% year over year. Franchise Royalties and Fees in the quarter increased 32% to $10.3 million from the year-ago quarter.
Aaron's Company, Inc. Price, Consensus and EPS Surprise
Aaron’s franchisee revenues dropped 4.1% year over year to $97.1 million on reduced franchise locations. Same-store revenues for franchised stores grew 6.1%. Notably, revenues and customers of franchisees are not deemed as revenues and customers of the company.
Aaron’s adjusted EBITDA grew 4.8% year over year to $53.7 million from $51.2 million reported in the year-ago quarter. Also, adjusted EBITDA margin expanded 70 basis points (bps) to 12.5% in the reported quarter. The increase in adjusted EBITDA is attributed to a 300-bp reduction in write-offs to 4.3% of lease revenues.
Financial Position
The company ended 2020 with cash and cash equivalents of $76.1 million, a debt of $831 million and shareholders’ equity of $727.3 million. As of Dec 31, 2020, the company generated cash from operations of $355.8 million. Moreover, it had total available liquidity of $311.4 million as of Dec 31, 2020.
Outlook
For 2021, management anticipates revenues of $1.65-$1.70 billion and adjusted EBITDA of $155-$170 million. Moreover, it expects same-store revenues between flat and up 2% in 2021. The guidance is based on the assumption of a 25% effective tax rate, depreciation and amortization of $70-$75 million, and average shares outstanding of 35 million.
Other assumptions related to the guidance include no further deterioration in the current economic and retail environment in the United States, a gradual betterment of global supply-chain conditions and the absence of additional government stimulus or supplemental unemployment benefits in response to the pandemic.
Additionally, the company anticipates capital expenditures of $80-$90 million in 2021. It also estimates generating free cash flow of $80-$90 million for the year.
PVH Corp. (PVH - Free Report) , also a Zacks Rank #1 stock, has a long-term earnings growth rate of 18%.
BJ’s Wholesale Club Holdings, Inc. (BJ - Free Report) has a long-term earnings growth rate of 15.8%. Currently, it carries a Zacks Rank #2.
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Aaron's (AAN) Surpasses Q4 Earnings & Revenue Estimates
Aaron's Company, Inc. reported its first quarterly earnings after its planned separation from the parent company on Dec 1, 2020. The company’s fourth-quarter 2020 top and bottom lines outpaced the Zacks Consensus Estimate.
Moreover, adjusted earnings grew year over year. The company is benefiting from investments in customer servicing platforms, decisioning technologies, new store formats and the fast-growing digital business, which are aiding momentum in financial performance and lease portfolio growth.
Shares of the Zacks Rank #2 (Buy) company have gained 10.3% year to date, outperforming the industry’s 13.3% growth.
Q4 Highlights
Aaron's delivered adjusted earnings of 79 cents per share, which surpassed the Zacks Consensus Estimate of 78 cents. The bottom line also advanced 11.3% from 71 cents earned in the prior-year quarter.
On a GAAP basis, the company recorded earnings of 8 cents per share compared with 91 cents earned in the year-ago quarter.
Consolidated revenues declined 1.1% to $430.2 million but beat the Zacks Consensus Estimate of $424 million. The year-over-year revenue decline can be attributed to the net closure of 75 company-operated stores in 2020, partly negated by strength in customer payment activity. Moreover, same-store revenues rose 3.4% in the fourth quarter. Further, e-commerce lease revenues were up 39%.
Breaking up the components of consolidated revenues, we note that lease and retail revenues dipped 0.4% in the reported quarter to $386.9 million. Non-retail sales, which mainly include merchandise sales to franchisees, fell 15.2% year over year. Franchise Royalties and Fees in the quarter increased 32% to $10.3 million from the year-ago quarter.
Aaron's Company, Inc. Price, Consensus and EPS Surprise
Aarons Company, Inc. price-consensus-eps-surprise-chart | The Aarons Company, Inc. Quote
Aaron’s franchisee revenues dropped 4.1% year over year to $97.1 million on reduced franchise locations. Same-store revenues for franchised stores grew 6.1%. Notably, revenues and customers of franchisees are not deemed as revenues and customers of the company.
Aaron’s adjusted EBITDA grew 4.8% year over year to $53.7 million from $51.2 million reported in the year-ago quarter. Also, adjusted EBITDA margin expanded 70 basis points (bps) to 12.5% in the reported quarter. The increase in adjusted EBITDA is attributed to a 300-bp reduction in write-offs to 4.3% of lease revenues.
Financial Position
The company ended 2020 with cash and cash equivalents of $76.1 million, a debt of $831 million and shareholders’ equity of $727.3 million. As of Dec 31, 2020, the company generated cash from operations of $355.8 million. Moreover, it had total available liquidity of $311.4 million as of Dec 31, 2020.
Outlook
For 2021, management anticipates revenues of $1.65-$1.70 billion and adjusted EBITDA of $155-$170 million. Moreover, it expects same-store revenues between flat and up 2% in 2021. The guidance is based on the assumption of a 25% effective tax rate, depreciation and amortization of $70-$75 million, and average shares outstanding of 35 million.
Other assumptions related to the guidance include no further deterioration in the current economic and retail environment in the United States, a gradual betterment of global supply-chain conditions and the absence of additional government stimulus or supplemental unemployment benefits in response to the pandemic.
Additionally, the company anticipates capital expenditures of $80-$90 million in 2021. It also estimates generating free cash flow of $80-$90 million for the year.
A Few More Solid Picks
Crocs, Inc. (CROX - Free Report) has a long-term earnings growth rate of 15% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
PVH Corp. (PVH - Free Report) , also a Zacks Rank #1 stock, has a long-term earnings growth rate of 18%.
BJ’s Wholesale Club Holdings, Inc. (BJ - Free Report) has a long-term earnings growth rate of 15.8%. Currently, it carries a Zacks Rank #2.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>