Why Rent-A-Center Inc. Stock Popped Today

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 Rent-A-Center were up 12.6% as of 12 p.m. Tuesday after the company released better-than-expected first-quarter results.

So what: Consolidated quarterly revenue climbed 5.9% year over year to $877.6 million, helped by impressive same-store sales growth of 8%. Within that, core U.S. revenue fell 1.1% year over year to $629.2 million, albeit mostly due to Rent-A-Center's consolidation of 150 stores completed in last year's second quarter. Meanwhile, core U.S. same-store sales swung to a positive with modest growth of 1%. That translated to a 7.1% decline in adjusted earnings per share to $0.52.

Analysts, on average, were only expecting adjusted earnings of $0.50 per share on sales of $864 million.

Now what:Rent-A-Center CEO Robert Davis explained, "Our multi-year plan to improve the profitability and performance of our Core business continues to build momentum on a number of fronts."

Specifically, Rent-A-Center's newer smartphone category comprised over 8% of core U.S. sales during the quarter, while its flexible labor initiative began rolling out in 150 stores with general deployment expected across the network starting in June. In addition, Rent-A-Center has completed system integration with its third-party logistics provider, and should enjoy new cost efficiencies from its new supply chain and the first of five U.S. distribution centers this month. Finally, Rent-A-Center launched its first 10 Acceptance Now Direct locations and began online approvals of additional third-party retail partners, and is enjoying a fully operational new POS system in 34 stores so far.

In the end, it also helps that Rent-A-Center currently looks cheap trading at just 16.7 times trailing-12-month earnings, and 12 times next year's estimates. And yes, that could be a well-deserved discount given its modest top-line growth and recent earnings decline. But given Rent-A-Center's success so far, I won't be the least bit surprised if the stock continues to reward patient investors who are willing to wait as these new initiatives continue to gain steam.

The article Why Rent-A-Center Inc. Stock Popped Today originally appeared on Fool.com.

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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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