Bear of the Day: Conn's (CONN) - Bear of the Day

By
A A A

The retail industry is always a tough business thanks to intense competition and low margins. And even with the economy coming back a little as of late, many businesses in this sector have continued to struggle. Take for example Conn's ( CONN ), a Texas-based retailer that has been having a year to forget to say the least.

Conn's in Focus

Conn's is a retailer that is zeroed in on the South and Southwest regions of the U.S., focusing in on the home appliance, home office, and general 'big ticket' items. The company has less than 100 stores, so it still has plenty of room for expansion, though it has definitely run into some roadblocks as of late.

These issues largely stem from Conn's focus on credit sales which have powered the company's growth for years. However, in the most recent earnings report, customers' bad debts really weighed on the earnings results and led CONN management to slash their earnings expectations for the full year as well.

This drastically reduced forecast, along with ongoing worries regarding customer credit led to a monumental crash in shares of CONN, sending the stock lower by almost 30% in a single day. Thanks to this and an earlier weak earnings report, CONN is now down over 60% YTD, easily making it one of the worst stocks in the retail space. And given how analysts have been cutting their estimates for CONN lately, we could definitely see this bearish trend continue.

Recent Estimates

Over the past sixty days, not a single estimate has been revised higher for the current quarter/year or the following quarter/year. Instead, all the most recent estimates show a drastic cut in earnings expectations for CONN, signaling that more pain could be ahead.

After all, not only have estimates been moving lower, but the magnitude of these revisions have been immense too. The current quarter EPS consensus estimate has fallen from $0.90/share to just $0.82/share in the past week, while the current year estimate has plunged from $3.58/share to only $2.90/share today in just the past week as well.



Thanks to this incredibly poor trend and the weak outlook given by management, we aren't expecting CONN to turn it around any time soon. That is why we have given CONN a Zacks Rank #5 (Strong Sell), and are looking for more underperformance from this troubled stock in the future.

Other Picks

Unfortunately, the entire retail consumer electronics sector is looking quite poor as of now, as the segment doesn't have a single 'buy' ranked stock, while the industry is in the bottom 10% of all the ones we cover. Instead, the retail convenience store segment might be a better choice, as its rank is in the top 2% of all industries.  

One standout in this segment is TravelCenters of America ( TA ), a Zacks Rank #1 (Strong Buy) stock. This company is projected to see EPS growth of over 170% this year, and full year estimates have been on the rise as well. Given this, TA might be a better retail pick in the near term, especially when compared to the floundering CONN which should probably be avoided by investors right now.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

TRAVELCENTERS (TA): Free Stock Analysis Report

CONNS INC (CONN): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks

Referenced Stocks: TA , CONN

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

Most Active by Volume

93,859,723
  • $14.80 ▼ 2.05%
56,373,600
  • $17.065 ▲ 0.32%
53,626,624
  • $56.832 ▲ 7.92%
47,765,712
  • $3.42 ▼ 3.66%
43,253,950
  • $14.32 ▼ 2.59%
38,566,993
  • $100.8852 ▲ 0.77%
30,213,520
  • $4.852 ▼ 1.98%
28,947,805
  • $98.74 ▲ 0.09%
As of 9/30/2014, 02:53 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com