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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.
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