A solid year-to-date return of 136% along with strong
third-quarter fiscal 2013 preliminary results and rising
) to attain a Zacks #1 Rank (Strong Buy) on November 9, 2012.
This durable consumer goods retailer has consistently
outperformed the Zacks Consensus Estimates in the last three
quarters by an average magnitude of 8.7%.
However, one of the company's peers,
Best Buy Company, Inc
) Zacks Rank has been recently downgraded to #5 (Strong Sell)
after it posted a 94% decline in its third quarter 2012 earnings
per share. Best Buy's earnings of 3 cents a share also missed the
Zacks Consensus Estimate of 12 cents.
The Rank Drivers
Strong same-store sales momentum, continued share gains, the
pricing power, margin improvement and unit remodeling are the
rank drivers for this stock.
On November 8, Conns reported preliminary sales, same store
sales and gross margin results for its fiscal third quarter. Net
sales went up 8% year over year to $167.3 million in the quarter,
primarily driven by robust same-store sales growth.
Same store sales increased 12.6% during the quarter, marking
the fifth consecutive double-digit same-store sales growth for
the company. The upside in retail sales was the result of higher
average selling prices, increased furniture and mattress
offerings and growth in home office sales. This was offset by a
decline in unit volume due to the previously closed stores.
The retail gross margin stood at 35% in the quarter, up 970
basis points year over year. A favorable sales mix across all
product categories, combined with an expanded furniture and
mattress business, were primarily responsible for the
During the second quarter earnings release, the company raised
its diluted earnings per share guidance for fiscal 2013 to
$1.40-$1.50 per share from the range of $1.30-$1.40 projected
earlier. Growth in same stores sales is now expected to be
10%-15%, compared with the company's previously guided mid- to
high-single digit growth. Conns also plans to open as many as
five new stores during the year. Of these, the company has so far
opened two stores, one each in Texas and New Mexico.
Conns is scheduled to release its complete fiscal 2013 third
quarter results on December 3, 2012.
Preliminary Results Drive Estimates
On the heels of the preliminary results, earnings estimates
have been trending higher in the past 30 days. The Zacks
Consensus Estimate for fiscal 2013 climbed 2.7% to $1.52 per
share, as 4 of 7 estimates were revised upward. This represents
year-over-year growth of 120.3%.
The Zacks Consensus Estimate for fiscal 2014 increased 3.3% to
$1.90 per share over the same time frame, as 4 of 7 estimates
climbed up once again, reflecting a year-over-year increase of
Conns currently trades at a forward P/E of 18.09x,
significantly above the peer group average of 8.34x. Also, on a
price-to-book basis, the shares trade at 2.34x, reflecting a
substantial premium of 78.6% to the peer group average of 1.31x.
Given the company's strong fundamentals, the premium valuation is
justified, and is supported by the long-term earnings growth
projection of 13%, which is higher than the peer group average of
Founded in 1890 and headquartered in Beaumont, Texas, Conns is
a retailer of durable consumer products in the United States. The
company deals in home appliances, furniture and mattresses,
consumer electronics and home office products. Additionally, the
company offers a variety of products on a seasonal basis,
including lawn and garden equipment. The company also provides
flexible in-house credit options for its customers, in addition
to third-party financing programs and third-party rent-to-own
payment plans. The company has a market cap of $895.84
BEST BUY (BBY): Free Stock Analysis Report
CONNS INC (CONN): Free Stock Analysis Report
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