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Aaron's (AAN) Beats on Q4 Earnings & Sales, Guides for 2018
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After reporting a negative earnings surprise in the third quarter, Aaron’s, Inc. returned to positive surprise in fourth-quarter 2017 with earnings topping estimates and improving year over year. With this, the company has delivered earnings beat in six of the trailing seven quarters. Additionally, the company’s top-line surpassed estimates for the fourth straight quarter.
Driven by robust past performances and recent momentum, this Zacks Rank #1 (Strong Buy) stock has gained 8.4% in the past month against the industry’s decline of 0.9%.
The solid fourth-quarter results came on the back of significant growth at the Progressive segment and notable improvement in profit margin for the Aaron’s business. Improvements in average ticket size, customer retention rates and collections also contributed to strong results. At quarter end, the company’s lease margin touched its highest level in three years.
Q4 Highlights
Aaron's delivered adjusted earnings of 65 cents per share, which surpassed the Zacks Consensus Estimate of 54 cents and also increased 30% from the prior-year quarter.
Including one-time items, the company reported GAAP earnings per share of $2.46 compared with 30 cents in the prior-year quarter. Earnings for fourth-quarter 2017 included a net gain of $137 million from the recent Tax Cuts and Jobs Act.
The company’s top line came in at $884.6 million, up 11.2% year over year and ahead of the Zacks Consensus Estimate of $874.3 million driven by sharp increase in progressive leasing revenues.
Comparable-store sales (comps) at company-operated stores dropped 5.4%. Further, the customer count on a same-store basis dipped 4%. At quarter end, the company-operated Aaron’s stores had 983,000 customers, reflecting a 1% year-over-year increase.
Aaron’s franchisee revenues also declined 24.3% to $162.1 million in the reported quarter. Same store revenues for franchise stores and same-store customer counts declined decreased 5.2% and 3.9%, respectively. In fact, the franchisees had a customer base of 416,000, at the end of 2017, representing a decline of 23.5% year over year.
The company’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) improved 21.7% year over year to $89.9 million. Moreover, the adjusted EBITDA margin expanded 230 basis points (bps) to about 9.3% in the quarter.
Aaron's operates through three primary businesses — the Progressive Leasing's virtual lease-to-own business, Aaron's branded company-owned and franchised lease-to-own stores, Aarons.com and Woodhaven (collectively known as the Aaron's Business), and Dent-A-Med, Inc. – DAMI.
Progressive Leasing
Progressive Leasing's revenues came in at $428.5 million in the reported quarter, up 32.3% year-over-year. This was driven by a 10% rise in the number of active doors and 24% growth in invoice volume per active door. As of Dec 31, 2017, the segment had 740,000 customers representing 24% growth year over year.
The segment’s adjusted EBITDA was $50 million compared with $41.7 million in the year-ago quarter. However, adjusted EBITDA margin expanded 40 bps to 5.6%.
Aaron's Business
Aaron’s Business’ total revenues declined 3.6% to $446.9 million in the fourth quarter. However, lease revenues and fees for the three months ended Dec 31, 2017 increased 0.6% year over year. However, non-retail sales decreased 17.0% compared with the year-ago quarter.
Adjusted EBITDA for the Aaron's Business segment was $41.4 million, up 27.8% from the year-ago figure of $32.3 million. However, EBITDA margin contracted 60 bps to 4.7%.
DAMI
Revenues at the DAMI segment were $9.3 million up from $7.5 million in the year-ago period.
Financial Position
Aaron’s ended the quarter with cash and cash equivalents of $51 million, debt of $368.8 million and shareholders’ equity of $1,728 million.
During 12 months of 2017, the company generated cash from operations of $158.1 million. Further, Aaron's repurchased 753,000 shares in fourth-quarter 2017 for $28.2 million.
Moreover, the company has replaced its existing buyback program with a fresh authorization to repurchase up to 500 million.
2018 Guidance
Management remains impressed with quarterly performance and looks forward to its Progressive business’ growth and progress on transformation of its Aaron’s Business. Further, it aims at maximizing revenue and EBITDA growth in 2018.
The company provided outlook for 2018. Aaron's now expects total revenues in the range of $3.68-$3.89 billion. Meanwhile, management is anticipating 2018 adjusted earnings in the band of $3.20-3.50 per share. The Zacks Consensus Estimate for current year is pegged at $3.27 per share. Notably, this guidance excludes the Progressive and franchisee acquisition associated with intangible amortization, along with the future one-time or unusual items. GAAP earnings projection is raised in the range of $2.90-$3.20 per share.
Total revenues for Aaron’s Business segment are projected in the band of $1.70-$1.80 billion, which comprises of lease revenue of $1.40-$1.50 billion. Moreover, for the Aaron’s business, annual same stores revenue is estimated to decline in the range of 1-4%.
While revenues at Progressive are estimated in the band of $1.95-$2.05 billion, the same at the DAMI segment are projected to be between $30 million and $40 million.
The company’s adjusted EBITDA is now expected to be in $380-$413 million band. On a segmental basis, Aaron’s Business adjusted EBITDA is continued to be anticipated in the range of $170-$185 million. EBITDA for the Progressive division is guided in the band of $215-$230 million. For the DAMI segment, its EBITDA is projected to decline in the range of $2-$5 million.
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American Eagle pulled off an average positive earnings surprise of 2.6%, in the trailing four quarters. Additionally, it has a long-term earnings growth rate of 5.5%.
Big Lots delivered an average positive earnings surprise of 11.1% in the trailing four quarters. Further, it has a long-term earnings growth rate of 13.5%.
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Aaron's (AAN) Beats on Q4 Earnings & Sales, Guides for 2018
After reporting a negative earnings surprise in the third quarter, Aaron’s, Inc. returned to positive surprise in fourth-quarter 2017 with earnings topping estimates and improving year over year. With this, the company has delivered earnings beat in six of the trailing seven quarters. Additionally, the company’s top-line surpassed estimates for the fourth straight quarter.
Driven by robust past performances and recent momentum, this Zacks Rank #1 (Strong Buy) stock has gained 8.4% in the past month against the industry’s decline of 0.9%.
The solid fourth-quarter results came on the back of significant growth at the Progressive segment and notable improvement in profit margin for the Aaron’s business. Improvements in average ticket size, customer retention rates and collections also contributed to strong results. At quarter end, the company’s lease margin touched its highest level in three years.
Q4 Highlights
Aaron's delivered adjusted earnings of 65 cents per share, which surpassed the Zacks Consensus Estimate of 54 cents and also increased 30% from the prior-year quarter.
Including one-time items, the company reported GAAP earnings per share of $2.46 compared with 30 cents in the prior-year quarter. Earnings for fourth-quarter 2017 included a net gain of $137 million from the recent Tax Cuts and Jobs Act.
The company’s top line came in at $884.6 million, up 11.2% year over year and ahead of the Zacks Consensus Estimate of $874.3 million driven by sharp increase in progressive leasing revenues.
Comparable-store sales (comps) at company-operated stores dropped 5.4%. Further, the customer count on a same-store basis dipped 4%. At quarter end, the company-operated Aaron’s stores had 983,000 customers, reflecting a 1% year-over-year increase.
Aaron’s franchisee revenues also declined 24.3% to $162.1 million in the reported quarter. Same store revenues for franchise stores and same-store customer counts declined decreased 5.2% and 3.9%, respectively. In fact, the franchisees had a customer base of 416,000, at the end of 2017, representing a decline of 23.5% year over year.
The company’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) improved 21.7% year over year to $89.9 million. Moreover, the adjusted EBITDA margin expanded 230 basis points (bps) to about 9.3% in the quarter.
Aaron's, Inc. Price, Consensus and EPS Surprise
Aaron's, Inc. Price, Consensus and EPS Surprise | Aaron's, Inc. Quote
Segment Details
Aaron's operates through three primary businesses — the Progressive Leasing's virtual lease-to-own business, Aaron's branded company-owned and franchised lease-to-own stores, Aarons.com and Woodhaven (collectively known as the Aaron's Business), and Dent-A-Med, Inc. – DAMI.
Progressive Leasing
Progressive Leasing's revenues came in at $428.5 million in the reported quarter, up 32.3% year-over-year. This was driven by a 10% rise in the number of active doors and 24% growth in invoice volume per active door. As of Dec 31, 2017, the segment had 740,000 customers representing 24% growth year over year.
The segment’s adjusted EBITDA was $50 million compared with $41.7 million in the year-ago quarter. However, adjusted EBITDA margin expanded 40 bps to 5.6%.
Aaron's Business
Aaron’s Business’ total revenues declined 3.6% to $446.9 million in the fourth quarter. However, lease revenues and fees for the three months ended Dec 31, 2017 increased 0.6% year over year. However, non-retail sales decreased 17.0% compared with the year-ago quarter.
Adjusted EBITDA for the Aaron's Business segment was $41.4 million, up 27.8% from the year-ago figure of $32.3 million. However, EBITDA margin contracted 60 bps to 4.7%.
DAMI
Revenues at the DAMI segment were $9.3 million up from $7.5 million in the year-ago period.
Financial Position
Aaron’s ended the quarter with cash and cash equivalents of $51 million, debt of $368.8 million and shareholders’ equity of $1,728 million.
During 12 months of 2017, the company generated cash from operations of $158.1 million. Further, Aaron's repurchased 753,000 shares in fourth-quarter 2017 for $28.2 million.
Moreover, the company has replaced its existing buyback program with a fresh authorization to repurchase up to 500 million.
2018 Guidance
Management remains impressed with quarterly performance and looks forward to its Progressive business’ growth and progress on transformation of its Aaron’s Business. Further, it aims at maximizing revenue and EBITDA growth in 2018.
The company provided outlook for 2018. Aaron's now expects total revenues in the range of $3.68-$3.89 billion. Meanwhile, management is anticipating 2018 adjusted earnings in the band of $3.20-3.50 per share. The Zacks Consensus Estimate for current year is pegged at $3.27 per share. Notably, this guidance excludes the Progressive and franchisee acquisition associated with intangible amortization, along with the future one-time or unusual items. GAAP earnings projection is raised in the range of $2.90-$3.20 per share.
Total revenues for Aaron’s Business segment are projected in the band of $1.70-$1.80 billion, which comprises of lease revenue of $1.40-$1.50 billion. Moreover, for the Aaron’s business, annual same stores revenue is estimated to decline in the range of 1-4%.
While revenues at Progressive are estimated in the band of $1.95-$2.05 billion, the same at the DAMI segment are projected to be between $30 million and $40 million.
The company’s adjusted EBITDA is now expected to be in $380-$413 million band. On a segmental basis, Aaron’s Business adjusted EBITDA is continued to be anticipated in the range of $170-$185 million. EBITDA for the Progressive division is guided in the band of $215-$230 million. For the DAMI segment, its EBITDA is projected to decline in the range of $2-$5 million.
Looking for Solid Stocks, Check These
Investors interested may consider Beacon Roofing Supply Inc. (BECN - Free Report) , American Eagle Outfitters Inc. (AEO - Free Report) and Big Lots Inc. , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Beacon Roofing delivered an average positive earnings surprise of 12.3%, in the trailing four quarters. It has a long-term earnings growth rate of 18.8%.
American Eagle pulled off an average positive earnings surprise of 2.6%, in the trailing four quarters. Additionally, it has a long-term earnings growth rate of 5.5%.
Big Lots delivered an average positive earnings surprise of 11.1% in the trailing four quarters. Further, it has a long-term earnings growth rate of 13.5%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>