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Aaron's Inc. (AAN), one of the leading rent-to-own operators in the U.S., is slated to report its second-quarter 2012 financial results on July 24. The current Zacks Consensus Estimate for the quarter stands at 47 cents per share, indicating an increase of 14.6% from the prior-year quarter's earnings. Revenue, as per the Zacks Consensus Estimate, is $522 million.

First-Quarter Synopsis

Aaron's first-quarter adjusted earnings of 64 cents a share outdid the Zacks Consensus Estimate of 60 cents, and increased 16% from 55 cents earned in the prior-year quarter, driven by growth registered in its top line.

The quarter's earnings also surpassed the higher end of management's guidance range of 58 cents to 62 cents a share. On a reported basis, including one-time items, earnings came in at 92 cents a share, up from 55 cents delivered in the year-ago quarter.

Aaron's top line jumped 10% to $586.9 million in the first quarter from $532.7 million in the prior-year quarter. Total revenue was also above the Zacks Consensus Estimate of $572.0 million. The company's comparable-store sales (comps) in the quarter rose 4.8% while stores open for over two years witnessed a 2.6% increase in comps.

Management Guidance

Aaron's expects to report total revenue of $525.0 million and earnings per share of 44 cents to 48 cents in the second quarter of 2012. For 2012, the company expects total revenue of $2.2 billion and therefore raised its adjusted earnings per share guidance to $1.96 to $2.08, up from its earlier projected guidance range of $1.88 to $2.04.

Estimate Revisions Trend


Currently, we do not see any estimate revisions. Of the 10 analysts, none have revised their estimates in the last 7 or 30 days, either for second-quarter or for 2012.


The magnitude of estimate revisions for Aaron's depicts a neutral outlook for the upcoming second quarter and 2012. Over the last 7 and 30 days, estimates for the upcoming quarter and 2012 have remained unchanged at 47 cents and $2.03 per share, respectively.

Mixed Surprise History

With respect to earnings surprises, Aaron's has topped as well as missed the Zacks Consensus Estimate over the last four quarters in the range of negative 5.3% to positive 6.7%. The average surprise over the last four quarter remained at positive 0.7%.

Our Recommendation

Aaron's leverages an extensive network of stores to effectively penetrate into its target markets, which in turn, facilitates the company to generate healthy sales and gain a competitive advantage over its competitors.

Despite a sluggish recovery in the economy, Aaron's witnessed healthy demand for its products and services. Further, the company is focusing on store expansion strategy to drive top line growth and intends to expand its store networks by 5% - 7% in 2012.

Aaron's is a rent-to-own operator in the United States and has a low price provider strategy. The company is involved in the rental and specialty retailing of consumer electronics, residential and office furniture, household appliances, and accessories. The company competes directly with Rent-A-Center Inc (NASDAQ:RCII).

Currently, Aaron's holds a Zacks #3 Rank, implying a short-term Hold rating on the stock. Moreover, the company maintains a long-term Neutral recommendation on the stock.

Source: Aaron's Inc.: Earnings Preview

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