NEW YORK (TheStreet) -- Shares of Rent-A-Center Inc. (RCII) are falling -13.44% to $25.56 in pre-market trading on Friday after the company warned its second quarter earnings and revenue would would fall below analyst expectations.
The company projects second quarter adjusted earnings of 36 cents to 38 cents per share, lower than 48 cents per share, which analysts surveyed by Reuters had projected.
Rent-A-Center projects revenues of $773 million, while analysts expect revenue of $786.4 million in the quarter.
TheStreet Ratings team rates RENT-A-CENTER INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate RENT-A-CENTER INC (RCII) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, good cash flow from operations, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RCII's revenue growth has slightly outpaced the industry average of 1.4%. Since the same quarter one year prior, revenues slightly increased by 1.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has slightly increased to $120.06 million or 5.81% when compared to the same quarter last year. In addition, RENT-A-CENTER INC has also modestly surpassed the industry average cash flow growth rate of -3.80%.
- The gross profit margin for RENT-A-CENTER INC is currently very high, coming in at 90.18%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 3.46% trails the industry average.
- RCII's debt-to-equity ratio of 0.64 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further.
- You can view the full analysis from the report here: RCII Ratings Report