Can Aaron's (AAN) Retain Positive Earnings Trend In Q2?

Aaron's, Inc. AAN is scheduled to release second-quarter 2017 results on Jul 28. The question facing investors is whether this rent-to-own retailer will be able to deliver a positive earnings surprise in the quarter to be reported.

Aaron's posted a positive earnings surprise of 21.2% in the last reported quarter, which marked its fourth consecutive earnings beat. The company has an average positive earnings surprise of 10.6% in the trailing four quarters.

Aaron's, Inc. Price and EPS Surprise


Aaron's, Inc. Price and EPS Surprise | Aaron's, Inc. Quote

What to Expect?

The Zacks Consensus Estimate for second-quarter 2017 has been stable in the last 30 days. However, the current Zacks Consensus Estimate of 58 cents per share for the quarter reflects a year-over-year decline of 1.7%. Further, analysts polled by Zacks expect revenues of $790.4 million, up 0.1% from the year-ago quarter.

Aaron’s forms part of the Retail-Wholesale sector. Per the latest Earnings Preview, the Retail-Wholesale sector’s earnings are expected to fall 0.2%, while revenues are expected to grow 3.9%.

Factors at Play

While Aaron’s has a solid earnings history, the top line continues to struggle. Though the company managed to beat sales estimate in the first quarter, after four consecutive misses, its top line declined year over year mainly due to soft performance at its core – Aaron’s Business. Additionally, sales were impacted by lower franchised revenues, a drop in comparable store sales (comps) and lower customer count on a same-store basis.

However, management remains impressed with the performance of Progressive division, which continues to have strong prospects. Going forward, the company remains optimistic of growing Progressive business further, and continues to focus on transforming Aaron’s direct-to-consumer operations.

Further, we note that Aaron’s has outperformed the broader industry in the last three months. The company’s shares have increased 24%, while the industry grew only 5%.

That said, let’s wait and see if the strength in the Progressive division and the company’s transformation efforts can aid in sustaining the stock momentum.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Aaron’s is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Aaron’s currently sports a Zacks Rank #1, which increases the predictive power of ESP. However, the company has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 58 cents. The combination of Aaron’s Zacks Rank #1 and ESP of 0.00% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Alibaba Group Holding Limited BABA currently has an Earnings ESP of +4.11% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Clorox Co. CLX currently has an Earnings ESP of +0.67% and a Zacks Rank #2.

Nordstrom Inc. JWN has an Earnings ESP of +4.92% and a Zacks Rank #3.

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