Update: Aaron's Earnings

| About: Aaron's Inc. (AAN)


The company beat earnings consensus by nearly 6%.

However, shares have since fallen, which reaffirms our thesis that investors are still concerned about the company’s long-term prospects.

We noted the prospects of a downward revision for 2014 earnings given analysts' euphoric optimism.

Shares of Aaron's (NYSE:AAN) has plummeted nearly 27% over the last month. 2Q earnings came in at $0.37 a share (beating consensus of $0.35) and revenues were in-line with expectations. The company noted that its 2Q performance in its core business was less than pleasing. Now, the company is planning to take aggressive steps to boost revenues.

2014 EPS are expected to come in at $1.68 according to Wall Street consensus, well below the $1.97 Wall Street was expecting just last month. 2014 EPS is now expected to be down 10% y/y, compared to the previously expected growth of 6%.

Shares are down nearly 9% since our October article. At the time we first covered Aaron's it traded at 15x earnings, it's now trading at upwards of 18x. Aaron's was one of the biggest benefactors of the credit crunch and hit all-time highs earlier this year. However, one of the biggest headwinds will be a rebounding economy. Consumer with more money will not have to pay the high prices and high rates that the rent-to-own industry pushes on shoppers. As we noted in October,

Yet, with analysts expecting EPS to come in at record highs in '14, there's a big opportunity for a miss. The headwinds are more than afoot. Its electronics and computers business generates some 42% of revenues. The electronics segment is seeing serious pressure from the likes of Amazon. Yet, Best Buy also appears to be hitting on all cylinders. Best Buy introduced a price match guarantee that's catching on, to say the least.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.