(RCII) Rent-A-Center Topped Earnings Estimates

Rent-A-Center, Inc. (RCII), the largest rent-to-own operator, recently posted third-quarter earnings of 55 cents per share, which surpassed the Zacks Consensus Estimate of 50 cents. EPS results climbed 25% from 44 cents delivered in the prior-year quarter buoyed by stringent cost-control measures.

Management expects fourth-quarter earnings in the range of 55 cents to 61 cents per share. For fiscal 2010, earnings is projected between $2.30 and $2.50 per share. The Zacks Consensus Estimate for the fourth quarter and fiscal year are 58 cents and $2.50 per share, respectively.

Total revenue tumbled 5.3% year-over-year to $671.3 million due to 6.1% decline in comparable-store sales. Management expects comps to fall between 3% and 5% for fourth-quarter 2009, and to be flat for fiscal year 2010.

Total revenues are expected in the range of $662 million to $677 million for fourth quarter and between $2.7 billion and $2.8 billion for fiscal year.

Rent-A-Center offers consumer electronics, appliances and furniture products under rental purchase agreements that allow the customer to obtain ownership of the merchandise on the completion of the rental period.

The company’s operating profit jumped 9.5% to $64.4 million, whereas operating profit margin expanded 130 basis points to 9.6%. Adjusted EBITDA rose marginally by 0.6% to $81 million, whereas adjusted EBITDA margin inflated by 70 basis points to 12.1%.

During the quarter, the company opened 13 stores. Management expects to open 10 to 15 company-owned locations during the fourth quarter and 25 to 35 stores in fiscal 2010. At the end of the quarter, there were 3,004 company-owned stores nationwide, and in Canada and Puerto Rico.

Rent-A-Center also provides various financial services, such as short-term secured and unsecured loans, debit cards, and money transfer services under the trade name RAC Financial Services.

During the quarter, the company added financial services to two stores. The company expects to add financial services to about 10 rent-to-own store locations during the fourth quarter and to about 50 stores in fiscal 2010. At the end of the quarter, financial services were available at 345 stores.

The company ended the quarter with cash and cash equivalents of $39.9 million, senior debt of $659.1 million and shareholders’ equity of $1,209.3 million.

Zacks Investment Research
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