On Apr 30, 2014, Zacks Investment Research upgraded
), the leading rent-to-own retail operator, to a Zacks Rank #1
Why the Upgrade?
The company has been witnessing rising earnings estimates
since it released its first-quarter 2014 earnings results on Apr
25, 2014, wherein its earnings of 53 cents per share came within
its own guidance range Moreover, an upbeat guidance for 2014
further boosts analyst confidence. The quarterly earnings came in
line with the Zacks Consensus Estimate.
Although the bottom line declined 20.9% mainly due to
decreased revenues and higher operating expenses, the stock has
been gaining momentum owing to the recently announced acquisition
of Progressive Finance Holdings LLC. The stock has gained
almost 6% since Apr 25.
Aaron's believes that the acquisition of Progressive Finance
Holdings will prove transformational by giving it an opportunity
to expand into the large and growing virtual rent-to-own
Progressive Finance Holdings, which provides web-based
lease-to-own financing programs for retailers, is expected to
provide solid investor returns for Aaron's shareholders, given
its exceptional growth metrics that registered 77% annual revenue
growth from $228 million in 2012 to $403 million in 2013.
Further, the company expects the acquisition to increase cash
earnings per share in 2014 in double digits and be significantly
accretive in 2015 as well. Further, Aaron's will benefit from
Progressive Finance Holdings' tie-ups with the largest U.S.
retailers, including Mattress Firm,
Big Lots Inc.
), Art Van Furniture and Sleepy's which adds about 15,000 new
sources of revenues for Aaron's.
Looking ahead, Aaron's has raised its outlook for 2014 after
taking the benefits of Progressive Finance Holdings acquisition
into account. For full-year 2014, Aaron's now expects revenues
and earnings in the range of $2.65-$2.75 billion and $1.95-$2.10
per share, respectively. This is higher than the previous revenue
and earnings guidance range of $2.3 billion and $1.80-$2.00 per
This has triggered an uptrend in the Zacks Consensus
Estimates, as analysts became more constructive on the stock's
future performance. This is evident from the movement witnessed
in the Zacks Consensus Estimate that jumped 6.5% to $1.98 for
2014 and 34.2% to $2.63 per share for 2015 in the past 30
Other Stocks Worth Considering
Other stocks worth a look in the retail sector include
American Apparel Inc.
Best Buy Co., Inc
), both of which carry a Zacks Rank #2 (Buy).
AARONS INC (AAN): Free Stock Analysis Report
AMER APPAREL (APP): Free Stock Analysis
BEST BUY (BBY): Free Stock Analysis Report
BIG LOTS INC (BIG): Free Stock Analysis
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