A solid year-to-date return of over 157% and raised fiscal
2013 outlook on strong third-quarter financial results along with
rising estimates aided
) to attain a Zacks #1 Rank (Strong Buy). This durable consumer
goods retailer has consistently outperformed the Zacks Consensus
Estimates in the last four quarters by an average magnitude of
However, one of the company's peers,
Best Buy Company, Inc
) Zacks Rank has been downgraded to #5 (Strong Sell) after it
posted a 94% decline in its third quarter 2012 earnings per
share. The company'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 December 3, 2012, Conns posted adjusted earnings per share
of 38 cents for its fiscal third quarter, beating the Zacks
Consensus Estimate by 40.7%. Earnings improved substantially from
the year-ago level of 2 cents.
Net revenue increased 10.6% year over year to $206.4 million,
driven by a gain of 8.2% in Retail segment sales and a 22.6%
increase in Credit segment sales. Same store sales increased
Retail gross margin was 35.5% in the quarter, up 1020 basis
points year over year. Improved margins across all product
categories, combined with growth in higher-margin furniture and
mattress sales, largely drove the retail gross margin in the
Conns raised its diluted earnings per share guidance for
fiscal 2013 to the range of $1.55- $1.60 from $1.40-$1.50 per
share projected earlier. Growth in same stores sales are expected
to be in 13%-16% range, while the company previously guided range
was 10%-15%. It also plans to open as many as five new stores for
the full year.
Additionally, the company came up with its guidance for fiscal
2014, projecting earnings per share between $2.05 and $2.15, with
same store sales increasing 0% to 5%. New store openings for
fiscal 2014 are expected at 10 to 12 stores.
Earnings Guidance Drives Estimates
Earnings estimates have been trending higher over the past 30
days on account of its raised fiscal 2013 forecasts as well as
fresh fiscal 2014 projections. The Zacks Consensus Estimate for
fiscal 2013 rose 4.6% to $1.59 per share, as 3 of 4 estimates
were revised higher. This represents year-over-year growth of
The Zacks Consensus Estimate for fiscal 2014 advanced 8.4% to
$2.06 per share over the same time frame, as 5 of 7 estimates
were lifted, reflecting a year-over-year increase of 29.3%.
Conns currently trades at a forward P/E of 19.05x,
significantly above the peer group average of 8.09x. Also, on a
price-to-book basis, the shares trade at 2.49x, reflecting a
substantial premium of 102.4% to the peer group average of 1.23x.
Given the company's strong fundamentals, the premium valuation is
justified, and is supported by the long-term earnings growth
projection of 15%, 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 $980.7
BEST BUY (BBY): Free Stock Analysis Report
CONNS INC (CONN): Free Stock Analysis Report
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