It has been about a month since the last earnings report for Rent-A-Center . Shares have lost about 3.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Rent-A-Center due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Rent-A-Center Q1 Earnings Beat, Revenues Grow Y/Y
Rent-A-Center reported better-than-expected revenues and earnings in the first quarter of 2022. While the top line increased year over year, the bottom line fell from the year-earlier quarter’s reported number.
Rent-A-Center posted adjusted earnings of 74 cents a share, surpassing the Zacks Consensus Estimate of 71 cents. However, the bottom line decreased significantly from $1.32 earned in the year-ago quarter.
Total revenues of $1,159.7 million came above the Zacks Consensus Estimate of $1,136 million. Also, the metric grew 11.9% year over year, mainly driven by gains from the buyout of Acima Holdings. On a pro-forma basis, revenues fell 5.8% on decreases in merchandise sales and rental and fees revenues.
Adjusted EBITDA came in at $99.5 million, down 42.9% from the year-ago period’s level on a pro-forma basis due to decreased pro-forma revenues, increased loss rates on account of lease vintages underwritten in late 2021 and elevated operating costs. Adjusted EBITDA margin contracted 560 basis points year over year to 8.6%.
Segmental Performance
Revenues at the Rent-A-Center Business segment dipped 1.2% to $518.5 million due to same-store sales decline of 1.1%. Same-store sales fell due to lower merchandise sales and early payout options in the reported quarter from the prior-year corresponding period’s reading. E-commerce accounted for 23.4% of the quarterly revenues compared with 22.3% in the prior-year period. Also, the segment’s lease portfolio value grew 5.6% year over year. As of Mar 31, 2022, the segment had 1,852 company-operated locations.
Revenues at the Acima segment (formerly known as the Preferred Lease segment) surged 31% from the prior-year quarter’s level to $599.4 million, mainly buoyed by gains from the Acima buyout. On a pro-forma basis, revenues dropped 8.1% while a gross merchandise volume (GMV) declined 21.2%, mainly from lower lease conversion rates and other macro-economic factors.
Mexico segment’s revenues totaled $15.7 million, up 8.4% on a constant-currency basis. Also, the segment’s same-store sales rose 7.6%. As of Mar 31, the unit had 122 company-operated locations.
Finally, Franchising revenues tumbled 34.6% to $26.1 million. This can primarily be attributed to lower inventory purchases per store. As of Mar 31, Rent-A-Center had 464 franchise-operated locations.
Other Financial Aspects
Rent-A-Center ended the reported quarter with cash and cash equivalents of $95.7 million, net senior debt of $964.1 million and a stockholders' equity of $523.1 million. RCII had an outstanding debt of $1.4 billion at the quarter end. It ended the quarter with $439 million of liquidity, including $344 million of undrawn revolving credit availability. RCII paid down $170 million on its revolving credit facility.
During the first quarter of 2022, Rent-A-Center generated cash of $205.3 million from operations and a free cash flow, including acquisitions and divestitures of $188.6 million. Capital expenditures totaled $16.4 million in the aforementioned period.
Outlook
Consolidated revenues are still projected in the bracket of $4.450-$4.600 billion for 2022, indicating a rise from $4.583 billion generated in 2021. Adjusted EBITDA is forecast between $515 million and $565 million, indicating a decline from $611 million recorded a year ago.
Adjusted earnings per share are still envisioned in the band of $4.50-$5.00, indicating a decline from $5.57 earned last year. Free cash flow is guided in the band of $390-$440 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -19.84% due to these changes.
VGM Scores
Currently, Rent-A-Center has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Rent-A-Center has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Rent-A-Center (RCII) Down 3.1% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Rent-A-Center . Shares have lost about 3.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Rent-A-Center due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Rent-A-Center Q1 Earnings Beat, Revenues Grow Y/Y
Rent-A-Center reported better-than-expected revenues and earnings in the first quarter of 2022. While the top line increased year over year, the bottom line fell from the year-earlier quarter’s reported number.
Rent-A-Center posted adjusted earnings of 74 cents a share, surpassing the Zacks Consensus Estimate of 71 cents. However, the bottom line decreased significantly from $1.32 earned in the year-ago quarter.
Total revenues of $1,159.7 million came above the Zacks Consensus Estimate of $1,136 million. Also, the metric grew 11.9% year over year, mainly driven by gains from the buyout of Acima Holdings. On a pro-forma basis, revenues fell 5.8% on decreases in merchandise sales and rental and fees revenues.
Adjusted EBITDA came in at $99.5 million, down 42.9% from the year-ago period’s level on a pro-forma basis due to decreased pro-forma revenues, increased loss rates on account of lease vintages underwritten in late 2021 and elevated operating costs. Adjusted EBITDA margin contracted 560 basis points year over year to 8.6%.
Segmental Performance
Revenues at the Rent-A-Center Business segment dipped 1.2% to $518.5 million due to same-store sales decline of 1.1%. Same-store sales fell due to lower merchandise sales and early payout options in the reported quarter from the prior-year corresponding period’s reading. E-commerce accounted for 23.4% of the quarterly revenues compared with 22.3% in the prior-year period. Also, the segment’s lease portfolio value grew 5.6% year over year. As of Mar 31, 2022, the segment had 1,852 company-operated locations.
Revenues at the Acima segment (formerly known as the Preferred Lease segment) surged 31% from the prior-year quarter’s level to $599.4 million, mainly buoyed by gains from the Acima buyout. On a pro-forma basis, revenues dropped 8.1% while a gross merchandise volume (GMV) declined 21.2%, mainly from lower lease conversion rates and other macro-economic factors.
Mexico segment’s revenues totaled $15.7 million, up 8.4% on a constant-currency basis. Also, the segment’s same-store sales rose 7.6%. As of Mar 31, the unit had 122 company-operated locations.
Finally, Franchising revenues tumbled 34.6% to $26.1 million. This can primarily be attributed to lower inventory purchases per store. As of Mar 31, Rent-A-Center had 464 franchise-operated locations.
Other Financial Aspects
Rent-A-Center ended the reported quarter with cash and cash equivalents of $95.7 million, net senior debt of $964.1 million and a stockholders' equity of $523.1 million. RCII had an outstanding debt of $1.4 billion at the quarter end. It ended the quarter with $439 million of liquidity, including $344 million of undrawn revolving credit availability. RCII paid down $170 million on its revolving credit facility.
During the first quarter of 2022, Rent-A-Center generated cash of $205.3 million from operations and a free cash flow, including acquisitions and divestitures of $188.6 million. Capital expenditures totaled $16.4 million in the aforementioned period.
Outlook
Consolidated revenues are still projected in the bracket of $4.450-$4.600 billion for 2022, indicating a rise from $4.583 billion generated in 2021. Adjusted EBITDA is forecast between $515 million and $565 million, indicating a decline from $611 million recorded a year ago.
Adjusted earnings per share are still envisioned in the band of $4.50-$5.00, indicating a decline from $5.57 earned last year. Free cash flow is guided in the band of $390-$440 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -19.84% due to these changes.
VGM Scores
Currently, Rent-A-Center has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Rent-A-Center has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.