Rent-A-Center, Inc. (NASDAQ:RCII) is one such stock that is struggling to find a place in investors’ portfolio. Why is it so? Share price of this rent-to-own operator has declined roughly 16% year to date, and is now hovering close to its 52-week low of $9.76. Moreover, the company currently carries a Zacks Rank #5 (Strong Sell). This implies that analysts covering the stock are not convinced about Rent-A-Center’s performance in the near future. As a result, the Zacks Consensus Estimate too has witnessed a downtrend.
Why is the Stock Out of Favor Now?
After registering an earnings beat in five straight quarters, Rent-A-Center succumbed to a negative earnings surprise in the second quarter of 2016. Notably, this also marked the fourth consecutive quarter of sales miss for the company. Moreover, both top and bottom lines declined year over year. The decrease in the top line is attributable to a decline witnessed across the Core U.S., Acceptance Now and Mexico segments.
The company’s quarterly earnings of 41 cents a share fell 18% short of the Zacks Consensus Estimate and the year-ago figure of 50 cents. Consolidated total revenue tumbled 8.1% to $749.6 million in the reported quarter and also came in below the Zacks Consensus Estimate of $786.2 million.
Accelerated point of sale system rollout, persistent sluggishness across the computers and tablets categories, headwinds across the oil-impacted markets and continued smartphones recast impacted results.
RENT-A-CENTER Price, Consensus and EPS Surprise
RENT-A-CENTER Price, Consensus and EPS Surprise | RENT-A-CENTER Quote
Subdued Outlook Triggered a Downtrend in Estimates
Following the murky performance, management lowered its previously issued outlook for 2016. The company now anticipates Core U.S. revenue to decrease in the band of 8.5%–11.5%, with comparable sales decline expected in a range of 5%–8%. Management had earlier projected Core U.S. revenue to fall 4%–6% in 2016, impacted by a comps decline of 1%–3%.
Rent-A-Center now projects Acceptance Now revenue between $805 million and $835 million for the full year, down from the previous guidance range of $850–$900 million. Based on these expectations, management envisions 2016 earnings per share to range from $1.65–$1.85.
Analysts polled by Zacks are less constructive on the stock. Over the past 60 days, the Zacks Consensus Estimate of $1.74 for 2016 and 2017 has declined 31 cents and 37 cents, respectively. Moreover, the Zacks Consensus Estimate for the third quarter has dropped 12 cents to 40 cents over the same time frame.
Stocks that Warrant a Look
It would be prudent for investors to look beyond Rent-A-Center, at least for the time being. Investors may consider better-ranked stocks such as Outerwall Inc. (NASDAQ:OUTR) , The Children's Place, Inc. (NASDAQ:PLCE) and Urban Outfitters Inc. (NASDAQ:URBN) , all sporting a Zacks Rank #1 (Strong Buy).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
RENT-A-CENTER (RCII): Free Stock Analysis Report
URBAN OUTFITTER (URBN): Free Stock Analysis Report
CHILDRENS PLACE (PLCE): Free Stock Analysis Report
OUTERWALL INC (OUTR): Free Stock Analysis Report
Original post