On Jul 18, 2014, Zacks Investment Research downgraded
), the consumer electronics and household appliances retailer, to a
Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Estimates for Aaron's have shown a downtrend since the company
lowered its earnings and sales forecast for the second quarter of
fiscal 2014 due to dismal performance of its core business.
Following last week's announcement, the company's shares have
slipped 2.5% to date.
This rent-to-own specialty retailer came up with its preliminary
results for the second quarter that reflects strong revenue
performance at the recently acquired Progressive business, more
than offset by disappointing results at its core operations. That
being said, the company forecasts revenue to be nearly $672 million
in the second quarter as against $675 million projected earlier.
Consequently, Aaron's slashed its adjusted earnings per share,
which is now expected to be in the range of 34-37 cents, while its
earlier anticipated adjusted earnings ranged between 43-48 cents
Adjusted earnings results for the quarter excludes the amortization
expenses and transaction costs related to Progressive's purchase as
well as other one-time costs and expenses. On a GAAP basis, the
company projects earnings in the range of 9-12 cents per share.
This trimmed guidance triggered a downtrend in the Zacks Consensus
Estimate, as analysts became less constructive on the stock's
future performance. This is evident from the movement witnessed in
the Zacks Consensus Estimate that fell 9.5% to $1.81 for 2014 and
6.4% to $2.48 per share for 2015 in the past 7 days.
Though Aaron's core business remains troubled, the company is
encouraged by the better-than-expected second quarter earnings and
revenue results of the recently acquired Progressive business.
Looking forward, Aaron's remains confident of Progressive's future
growth and is on track to revive its core business results through
its strategic initiatives.
Other Stocks to Consider
A better-ranked retail stock in the related industry that looks
promising and is expected to continue with its upbeat performance
) with a Zacks Rank #2 (Buy). Meanwhile, other stocks performing
well in the retail industry include
Citi Trends Inc.
Christopher & Banks Corp.
), each carrying a Zacks Rank #1 (Strong Buy).
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