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Conn's Upgraded to Strong Buy

Zacks Equity Research

On Apr 6, 2013, Zacks Investment Research upgraded Conn’s, Inc. (CONN) to a Zacks Rank #1 (Strong Buy). Shares of this specialty retailer of home appliances, furniture, mattresses and consumer electronics have amassed an impressive year-to-date return of 43.7%. 

Why the Upgrade?

Conn’s has been witnessing rising earnings estimates owing to impressive fourth-quarter fiscal 2013 results, on the back of strong comparable-store sales momentum, the pricing power, margin improvement and unit remodeling. The company declared strong results on Apr 3, 2013, wherein earnings of 54 cents a share came in line with the Zacks Consensus Estimate but surged 58.8% from 34 cents earned in the year-ago quarter.

This durable consumer goods retailer has outperformed the Zacks Consensus Estimate in 4 out of last 5 quarters and met in one, resulting in an average beat of 13.4%. The long-term expected earnings growth rate for the stock is 15%.

Conn’s total revenue grew 10.4% to $250.3 million in the quarter from $226.7 million in the year-ago period, and came ahead of the Zacks Consensus Estimate of $249 million. Comparable-store sales for the quarter climbed 7%.                                   

Revenue from the retail segment increased 9.7% to $208.7 million, whereas retail gross margin expanded 720 basis points to 36.9%. On the other hand, credit card segment revenue soared 14.5% to $41.6 million.

Buoyed by healthy results, management now projects fiscal 2014 earnings between $2.40 and $2.50 with expected comparable-store sales growth of 3% to 8%.

The Zacks Consensus Estimates for the first and second quarters of fiscal 2014 rose 11.9% and 8.2% to 47 cents and 53 cents, respectively, in the last 7 days. For fiscal 2014, the Zacks Consensus Estimate rose 17.8% to $2.45 per share over the same time frame.

Other Stocks to Consider

The stocks worth considering in the non-food retail, wholesale sector include Lumber Liquidators Holdings Inc. (LL), Macy’s, Inc. (M) and Cabela’s Inc. (CAB), all of which carry a Zacks Rank #1 (Strong Buy).The stocks are expected to continue with their upbeat performances.

Read the Full Research Report on CONN

Read the Full Research Report on M

Read the Full Research Report on CAB

Read the Full Research Report on LL

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