Rent A Center, Inc. (RCII) reported solid earnings despite a dip in sales. Estimates are on the rise as analysts adjust to the new information.

Company Description

Rent-A-Center owns and operates stores offering rent-to-own goods. Merchandise includes appliances, furniture, electronics, and accessories. Customers enter into a rental agreement that carries an option to maintain ownership at the end of the period.

Solid Quarter

On Apr 27 Rent-A-Center reported first quarter results that included net income of $45.4 million, up $9 million from last year. Earnings per share were $0.65, up from $0.54. The announcement beat Wall Street expectations by 10 cents and was the second consecutive surprise.

Estimates Continue to Rise

Following the announcement analysts have continued to revise estimates upward. The consensus estimate for 2009 is now $2.24, up from $2.13 over the past 3 months. Estimates for 2010 are averaging $2.44, up from $2.33.

Current forecasts would produce year-over-year growth of 9% for this year and in 2010. Shares are exchanging hands at less than 10 times earnings and carry a PEG ratio of 1.3.

The Chart

Shares of RCII are very susceptible to missing earnings guidance, as you can see by the chart below. However, the stock typically recovers though a series of better-than-expected quarters.

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