UPDATE: Stifel Upgrades Aaron's Following Acquisition Of Progressive

In a report published Monday, Stifel analyst John Baugh upgraded Aaron's (NYSE: AAN) from Hold to Buy and set a price target of $45.00 following the company's acquisition of Progressive Financial business.

Baugh reported that Progressive's sales and earnings growth should “should outstrip” Aaron's declining results.

The analyst wrote, “While Progressive's EBIT in 2014 will only represent 15% of consolidate profits (partly due to a nine month stub period), the approximate 50% growth in EBIT from Progressive will still allow Aaron's to grow its consolidated profits. Things get more interesting in 2015 when Progressive is owned for a full year, its contribution margins widen, and merger synergies begin to be realized. We estimate that in 2015, Progressive could be generating approximately one-third of Aaron's total profits.”

Stifel raised second and third quarter EPS estimates two and three cents, respectively, to $0.49 and $0.57. The analyst raised F14 and F15 estimated EPS from $1.99 and $2.61 to $2.08 and $2.74, respectively.

Shares of Aaron's closed at $32.17 on Friday.