Analysts Remain Bullish On Aaron's Despite Disappointing Q3, Lowered Outlook

Aaron's, Inc. AAN reported its third-quarter earnings below expectations and lowered its full-year guidance. While this could exert pressure on the stock, analysts remain bullish about the company’s outlook.

The Analysts

KeyBanc Capital Markets’ Bradley Thomas maintained an Overweight rating and a price target of $88.

Vincent Caintic of Stephens also has an Overweight rating for the company with a price target of $80.

The Thesis

Aaron’s reported its third-quarter adjusted earnings at 73 cents per share, significantly short of the consensus estimate of 82 cents per share.

Progressive missed expectations for revenue growth, mainly due to the timing of the ramp at Best Buy Co Inc BBY, KeyBanc analyst Thomas said. He added that the Aaron’s business generated strong revenue growth, but collections fell short of expectations.

Management reduced the full-year adjusted earnings guidance from $3.85-$4.00 to $3.75-$3.85 per share.

“While 3Q is disappointing, looking ahead, we continue to see AAN as a 2020/2021 top-line and EPS story, fueled by national account growth for Progressive,” Thomas wrote in the note.

Guidance was lowered entirely by the third-quarter miss, Stephens analyst Caintic said. He expects the fourth-quarter results to be solid, given the recent account wins and holiday sales season.

Caintic added that Progressive’s large addressable market remains as “the bull case” for the company.

Price Action

Shares of Aaron’s had nosedived more than 12% to $64.92 at the time of publishing on Tuesday.

Related Links:

Aaron's Analyst Says Partnership With Wayfair Could Add 4-27% To EPS

Best Buy Analyst Says Progressive Leasing Partnership Could Boost Sales