On Oct 26, 2013, Zacks Investment Research downgraded
) to a Zacks Rank #5 (Strong Sell).
APOLLO INV CP (AINV): Free Stock Analysis
AMER EXPRESS CO (AXP): Free Stock Analysis
CAPITAL ONE FIN (COF): Free Stock Analysis
RENT-A-CENTER (RCII): Free Stock Analysis
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Why the Downgrade?
Rent-A-Center has witnessed sharp downward estimate revisions
after posting disappointing third-quarter 2013 results and a
lowered outlook for 2013 on Oct 21, 2013.
Rent-A-Center's third-quarter earnings per share of 51 cents
missed the Zacks Consensus Estimate by 19.1% and was 23.9% lower
than the year-ago figure. Though revenues of $754.8 increased
2.1% year over year, it fell short of the Zacks Consensus
Estimate of $773 million.
The company also disappointed on the comparable-store sales front
with comps dipping 0.8%. The sustained deflation in electronic
products along with promotions undertaken to attract budget
constrained consumers led to the year-over-year decline in
average revenue per agreement and is the principal factor behind
the drop in comparable-store sales and trim in the guidance.
The gross and operating margins fell 10 basis points (bps) and
170 bps to 70.1% and 7.5%, respectively. However, sales of the
company's RAC Acceptance business rose 47.7% year over year.
Management now expects 2013 earnings in the band of $2.80-$2.85
per share, as against the earlier projection of $3.03-$3.15.
Rent-A-Center also forecasts a contraction of 10 bps in gross
profit, 100 bps in operating margin and 1.5 % decline in
comparable-store sales for 2013.
The softness in results as well as conservative outlook
stimulated a downward revision in the Zacks Consensus Estimate.
For 2013, the Zacks Consensus Estimate fell 9.0% to $2.83 per
share and for 2014, it fell 6.0% to $3.30 per share over the past
Other Stocks That Warrant a Look
Not all stocks are performing as disappointingly as
Rent-A-Center. Better-performing stocks in the finance sector
Apollo Investment Corp.
American Express Co.
Capital One Financial Corp.
). All these carry a Zacks Rank #2 (Buy).