Rent-A-Center Rises On Upbeat 3Q And Full-Year Outlook

Rent-A-Center stock rose 2.7% on Monday after the company announced better-than-expected guidance for the third quarter and raised its full-year outlook. The rental company provides lease-to-own options on products such as furniture, appliances, consumer electronics, and computers in 2,100 Rent-A-Center stores.

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Rent-A-Center (RCII) expects its 3Q revenue between $695 million and $715 million, adjusted EBITDA between $85 million and $95 million, and adjusted EPS in the range of $0.95 and $1.05. Analysts were expecting adjusted EPS of $0.61 on revenue of $687 million.

The company stated that its lease portfolio performance and customer payment activity have continued to be strong in both its businesses (Rent-A-Center business and Preferred Lease business) even without additional government stimulus.

Rent-A-Center also raised its full-year revenue forecast to the range of $2.78 billion to $2.83 billion compared to the previous outlook of $2.755 billion to $2.875 billion. It expects its 2020 adjusted EPS between $3.15 to $3.45, up from the previous range of $2.45 to $2.85. The company now anticipates free cash flow between $155 million to $180 million this year.

Last month, Loop Capital analyst Anthony Chukumba raised the price target for Rent-A-Center to $34 from $29 and maintained a Buy rating as the company’s 2Q results “continued to impress” with strong same store sales and invoice volume growth.

Chukumba added that Rent-A-Center management will likely begin buying back stock in the near future, which he expects to be highly accretive to earnings at current stock price levels. (See RCII stock analysis on TipRanks)

Year-to-date, RCII stock has risen a modest 1%. The average analyst price target of $32.25 implies an upside potential of about 11% in the coming months. The Street’s Moderate Buy consensus for Rent-A-Center is based on 2 Buys, 2 Holds and no Sell ratings.