Rent-A-Center Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of electronics and furniture rental specialist Rent-A-Center (Nasdaq: RCII  ) are being returned en masse by shareholders today, with the stock down as much as 11% following its fourth-quarter earnings results.

So what: Rent-A-Center's quarterly figures were actually pretty good. The company reported a 9% rise in sales and an adjusted profit of $0.85, which jumped 55% over the year-ago period thanks to an absence of one-time costs. However, good sometimes isn't good enough! Its $737.5 million in quarterly sales missed Wall Street's projection of $741.6 million. In addition, Rent-A-Center forecast 2012 revenue in a range of $3.1 billion to $3.2 billion and a profit of $3 to $3.20. While sales were in line with consensus expectations, the Street had been looking for $3.22 in EPS for fiscal 2012.

Now what: It's important to note that management tapered their growth expectations for 2012 based on consumers' cautious spending habits. Being that Rent-A-Center relies on the thrifty consumer to drive its bottom line, I can't say I'm particularly encouraged by its outlook. The company itself isn't grossly overvalued, but I just don't see the catalyst here that's going to make the stock move higher, even after today's drop.

Craving more input? Start by adding Rent-A-Center to your free and personalized watchlist so you can keep up on the latest news with the company.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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