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Upbound Group, Inc. (UPBD - Free Report) , earlier known as Rent-A-Center, posted its second-quarter 2024 results, wherein both the top and bottom lines surpassed the Zacks Consensus Estimate. The company’s revenues increased year over year while earnings declined.
Upbound reported a strong second-quarter performance with improved lease origination and customer payment trends, leading to earnings above internal projections despite challenging conditions. The company is optimistic about its platform's ability to support consumers and merchants facing financial constraints, prompting an upward revision of 2024 earnings targets. With strong first-half results and confidence in managing payment risks, Upbound sees a significant long-term market opportunity in serving financially underserved consumers.
The stock has rallied 14.3% in the past three months compared with the industry’s growth of 4.9%.
Upbound Group, Inc. Price, Consensus and EPS Surprise
Upbound posted adjusted earnings of $1.04 per share, surpassing the Zacks Consensus Estimate of $1.02 per share. However, the bottom line dipped from $1.11 in the year-ago quarter.
Total revenues of $1,076.5 million surpassed the consensus estimate of $1,038 million. The metric increased 9.9% year over year, mainly due to growth in rentals and fees revenues, as well as merchandise sales revenues.
Adjusted EBITDA was $124.5 million, down 4.6% year over year. An increase in adjusted EBITDA from the Acima segment was negated by a decrease in the same metric from the Rent-A-Center segment and an increase in corporate expenses.
The Zacks Rank #3 (Hold) company’s adjusted EBITDA margin dropped 170 basis points (bps) year over year to 11.6%. This decline was driven by a year-over-year dip in adjusted EBITDA margin at both Acima and Rent-A-Center.
Segmental Performance
Revenues in the Rent-A-Center segment increased 1.9% year over year to $474.9 million due to higher rentals and fees revenues and merchandise sales revenues. Same-store sales increased 2.6% year over year.
This segment’s same-store lease portfolio value increased 1.4% year over year. Segmental adjusted EBITDA margin was 16.3%, decreasing 160 basis points from the prior year. This decline was mainly due to the higher labor benefits costs, delivery expenses and store technology investments. As of Jun 30, 2024, the unit had 1,784 locations.
The Zacks Consensus Estimate for the Rent-A-Center segment’s revenues was pegged at $465.2 million for the quarter.
Revenues at the Acima segment (formerly known as the Preferred Lease segment) increased 19% year over year to $552.8 million, mainly due to growth in both rentals and fee revenues, as well as merchandise sales revenues. Also, gross merchandise volume increased 21% due to an expansion of retail partner locations, productivity, and its direct-to-consumer offerings. The segment’s adjusted EBITDA margin decreased 210 bps to 14.7% from 16.8% in the year-ago period.
The Zacks Consensus Estimate for the Acima segment’s revenues was pegged at $540.2 million for the quarter.
Franchising revenues decreased 7.3% to $27.9 million, primarily due to lower inventory sales. As of Jun 30, 2024, Rent-A-Center had 419 franchise-operated locations.
The Mexico segment’s revenues totaled $20.9 million, up 9.7% on a constant-currency basis. As of Jun 30, 2024, the unit had 131 company-operated locations.
Image Source: Zacks Investment Research
Other Financial Aspects
Upbound ended the reported quarter with cash and cash equivalents of $82.5 million, net senior debt of $874.8 million, and stockholders' equity of $596.3 million.
Outlook
The company's strong financial performance in the second quarter is a positive sign for its prospects. It is well-positioned to continue growing in 2024 despite the challenging market conditions.
UPBD expects to generate consolidated revenues of $4.10-$4.30 billion in 2024 compared with the previously mentioned $4.00-$4.20 billion. It reported revenues of $4 billion in 2023. Adjusted EBITDA, excluding SBC, is expected to be between $465 million and $485 million compared with the previously stated $455-$485 billion. In 2023, it reported an adjusted EBITDA of $455.7 million.
Adjusted earnings for 2024 are expected to be $3.65-$4 per share compared with the previously stated $3.55 and $4, whereas it reported $3.55 in 2023.
The company expects a free cash flow of $100-$130 million for 2024.
Eye These Solid Picks
Some better-ranked stocks in the retail space are The Gap, Inc. (GPS - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Urban Outfitters Inc. (URBN - Free Report) .
Gap is a premier international specialty retailer that offers a diverse range of clothing, accessories and personal care products. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Gap’s fiscal 2024 earnings and sales indicates growth of 22.4% and 0.2%, respectively, from fiscal 2023 reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It flaunts a Zacks Rank of 1 at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2024 earnings and sales indicates growth of 48.9% and 11.1%, respectively, from the fiscal 2023 reported levels. ANF has a trailing four-quarter average earnings surprise of 210.3%.
Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor, and gift products. It currently has a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Urban Outfitters’ fiscal 2024 earnings and sales indicates growth of 9.9% and 5.8%, respectively, from the year-ago actuals. URBN has a trailing four-quarter average earnings surprise of 16.9%.
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Upbound (UPBD) Q2 Earnings Beat Estimates, Revenues Increase Y/Y
Upbound Group, Inc. (UPBD - Free Report) , earlier known as Rent-A-Center, posted its second-quarter 2024 results, wherein both the top and bottom lines surpassed the Zacks Consensus Estimate. The company’s revenues increased year over year while earnings declined.
Upbound reported a strong second-quarter performance with improved lease origination and customer payment trends, leading to earnings above internal projections despite challenging conditions. The company is optimistic about its platform's ability to support consumers and merchants facing financial constraints, prompting an upward revision of 2024 earnings targets. With strong first-half results and confidence in managing payment risks, Upbound sees a significant long-term market opportunity in serving financially underserved consumers.
The stock has rallied 14.3% in the past three months compared with the industry’s growth of 4.9%.
Upbound Group, Inc. Price, Consensus and EPS Surprise
Upbound Group, Inc. price-consensus-eps-surprise-chart | Upbound Group, Inc. Quote
Q2 in Detail
Upbound posted adjusted earnings of $1.04 per share, surpassing the Zacks Consensus Estimate of $1.02 per share. However, the bottom line dipped from $1.11 in the year-ago quarter.
Total revenues of $1,076.5 million surpassed the consensus estimate of $1,038 million. The metric increased 9.9% year over year, mainly due to growth in rentals and fees revenues, as well as merchandise sales revenues.
Adjusted EBITDA was $124.5 million, down 4.6% year over year. An increase in adjusted EBITDA from the Acima segment was negated by a decrease in the same metric from the Rent-A-Center segment and an increase in corporate expenses.
The Zacks Rank #3 (Hold) company’s adjusted EBITDA margin dropped 170 basis points (bps) year over year to 11.6%. This decline was driven by a year-over-year dip in adjusted EBITDA margin at both Acima and Rent-A-Center.
Segmental Performance
Revenues in the Rent-A-Center segment increased 1.9% year over year to $474.9 million due to higher rentals and fees revenues and merchandise sales revenues. Same-store sales increased 2.6% year over year.
This segment’s same-store lease portfolio value increased 1.4% year over year. Segmental adjusted EBITDA margin was 16.3%, decreasing 160 basis points from the prior year. This decline was mainly due to the higher labor benefits costs, delivery expenses and store technology investments. As of Jun 30, 2024, the unit had 1,784 locations.
The Zacks Consensus Estimate for the Rent-A-Center segment’s revenues was pegged at $465.2 million for the quarter.
Revenues at the Acima segment (formerly known as the Preferred Lease segment) increased 19% year over year to $552.8 million, mainly due to growth in both rentals and fee revenues, as well as merchandise sales revenues. Also, gross merchandise volume increased 21% due to an expansion of retail partner locations, productivity, and its direct-to-consumer offerings. The segment’s adjusted EBITDA margin decreased 210 bps to 14.7% from 16.8% in the year-ago period.
The Zacks Consensus Estimate for the Acima segment’s revenues was pegged at $540.2 million for the quarter.
Franchising revenues decreased 7.3% to $27.9 million, primarily due to lower inventory sales. As of Jun 30, 2024, Rent-A-Center had 419 franchise-operated locations.
The Mexico segment’s revenues totaled $20.9 million, up 9.7% on a constant-currency basis. As of Jun 30, 2024, the unit had 131 company-operated locations.
Image Source: Zacks Investment Research
Other Financial Aspects
Upbound ended the reported quarter with cash and cash equivalents of $82.5 million, net senior debt of $874.8 million, and stockholders' equity of $596.3 million.
Outlook
The company's strong financial performance in the second quarter is a positive sign for its prospects. It is well-positioned to continue growing in 2024 despite the challenging market conditions.
UPBD expects to generate consolidated revenues of $4.10-$4.30 billion in 2024 compared with the previously mentioned $4.00-$4.20 billion. It reported revenues of $4 billion in 2023. Adjusted EBITDA, excluding SBC, is expected to be between $465 million and $485 million compared with the previously stated $455-$485 billion. In 2023, it reported an adjusted EBITDA of $455.7 million.
Adjusted earnings for 2024 are expected to be $3.65-$4 per share compared with the previously stated $3.55 and $4, whereas it reported $3.55 in 2023.
The company expects a free cash flow of $100-$130 million for 2024.
Eye These Solid Picks
Some better-ranked stocks in the retail space are The Gap, Inc. (GPS - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Urban Outfitters Inc. (URBN - Free Report) .
Gap is a premier international specialty retailer that offers a diverse range of clothing, accessories and personal care products. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Gap’s fiscal 2024 earnings and sales indicates growth of 22.4% and 0.2%, respectively, from fiscal 2023 reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It flaunts a Zacks Rank of 1 at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2024 earnings and sales indicates growth of 48.9% and 11.1%, respectively, from the fiscal 2023 reported levels. ANF has a trailing four-quarter average earnings surprise of 210.3%.
Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor, and gift products. It currently has a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Urban Outfitters’ fiscal 2024 earnings and sales indicates growth of 9.9% and 5.8%, respectively, from the year-ago actuals. URBN has a trailing four-quarter average earnings surprise of 16.9%.