Bull of the Day: Conn's Inc. (CONN)

Conn's, Inc. ( CONN ) is a specialty retailer currently operating retail locations in Texas and Louisiana. It sells major home appliances, including refrigerators, freezers, washers, dryers and ranges, and a variety of consumer electronics, including projection, plasma and LCD televisions, camcorders, VCRs, DVD players and home theater products. They also sell home office equipment, lawn and garden products and bedding, and continue to introduce additional product categories for the home to help increase same store sales and to respond to their customers' product needs.

Recent Earnings Report

The company reported Q2 18 earnings where they crushed the Zacks consensus earnings estimate ($0.26 actual vs. -$0.02 estimate), but came in just short of the Zacks consensus revenue estimate. Net income improved to $4.3 million compared to the year ago quarter where net income was -$11.9 million. On a non-GAAP adjusted net income basis Q2 18 was $8.2 million verse -$1.2 million in the year ago quarter. The Credit Services segment was the big driver behind the positive earnings report where credit revenues were $80.1 million compared to $65.7 million in Q2 17 (+21.9% gain). Further the portfolio yield rate jumped up to +18.7% from +14%.

The company also opened two new stores in North Carolina, and one in Virginia. This brings their total store count to 116.

Management's Take

According to Norm Miller, Chairman and CEO, " I am pleased to announce that Conn's returned to profitability during the second quarter of fiscal year 2018. This achievement is the direct result of Conn's differentiated and highly profitable retail model, the initiatives implemented to turn around our credit business, and the talented and experienced team we have assembled ."

" Conn's credit business continues to improve as recent originations become a larger percentage of the portfolio balance, and benefit from tighter underwriting standards and higher yields. The Company achieved a credit spread of 390 basis points during the second quarter of fiscal year 2018, which was the largest spread in seven quarters. We continue to make significant progress towards our goal of improving the profitability of the credit segment and achieving a credit spread of at least 1,000 basis points ."

Price and Earnings Consensus Graph

Due to the company turnaround, impressive earnings results, and the increased need for their products due to the recent hurricanes the stock price and future earnings estimates have seen increases as of late.

Conn's, Inc. Price and Consensus

Conn's, Inc. Price and Consensus | Conn's, Inc. Quote

Increasing Earnings Estimates

Over the past 30 days, earnings estimates for both FY 18 and FY 19 have seen positive estimate revisions; FY 18 rose from $0.42 to $0.58, and FY 19 was increased from $1.05 to $1.52.

Bottom Line

The company was negatively impacted by the hurricanes which caused several stores to close for an elongated period of time, but the anticipated uptick in new purchases of their merchandise is expected to give the company a nice boost later this quarter and into 2018. Further, the continued strength in their credit services segment will act as a tailwind over the next several quarters as well.

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

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

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