SWS Securities Raises Estimates for Rent-A-Center

Analyst Arvind Bhatia says business trends are stronger than expected and same-store sales are up

Rent-A-Center (RCII ) shares rose after the company agreed to resolve all class-action gender discrimination lawsuits. The company sees first quarter EPS of $1.00-$1.05.

SWS Securities raised its earnings estimates and price target on the news. Analyst Arvind Bhatia tells S&P MarketScope that business trends are stronger than expected and same-store sales are up. For every 1% increase in same store sales, the company's EPS is likely to get a $0.10 boost on top of his estimates, he says. He raised his EPS estimates from $3.68 to $3.91 for 2002, and from $4.23 to $4.43 for 2003. He also hiked his $45 price target to $53.

Bhatia thinks the settlement of the $47 million lawsuit is positive and removes a cloud over RCII. Although the settlement is higher than the original $20-$25 million estimate, he notes that it was quick and prevents the issue from getting protracted out over several quarters, if not years.

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