Conn's, Inc. Earnings: Can the Electronics Retailer Bounce Back?

Conn's stock plunged after last quarter's earnings report. Can the company rebound?

May 30, 2014 at 4:20PM

On Monday Conn's (NASDAQ:CONN) will release its quarterly report, and investors are nervously waiting to see if the electronics and appliance retailer can improve on its poor performance last quarter. Even as big-box electronics giant Best Buy (NYSE:BBY) saw similar disappointment in its holiday quarter results, Conn's faces the challenge of greater competition from Lowe's (NYSE:LOW) and other home-improvement chains cashing in on the recovery in the housing market.

Conn's plays an important niche role in the electronics and appliance retail space, as it aims at a more narrowly focused customer base than either Lowe's or Best Buy. In particular, Conn's benefits greatly from providing in-store financing for many of the products it sells, and when times are good for the low- and middle-income consumers who can't necessarily get credit from outside sources, Conn's can see big earnings growth from serving that market. Yet the strategy also means that Conn's faces credit risk. Let's take an early look at what's been happening with Conn's over the past quarter and what we're likely to see in its report.

Conn
Source: Conn's.

Stats on Conn's

Analyst EPS Estimate

$0.73

Change From Year-Ago EPS

19.7%

Revenue Estimate

$328.52 million

Change From Year-Ago Revenue

31%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Can Conn's earnings pick up steam?
In recent months, investors have had mixed views of Conn's earnings, raising April-quarter estimates by $0.04 per share but cutting full-year projections both this year and next by modest amounts. The stock has bounced back sharply from its losses earlier in the year, rising 35% since late February even though it still trades far below where Conn's started the year.

Conn's fourth-quarter results caused consternation even before the quarterly earnings report officially came out, as the company's stock tanked after giving preliminary guidance that disappointed shareholders. Conn's warned that adjusted earnings per share would come in 15% to 20% below what investors were expecting, and it gave negative guidance for the current fiscal year that fell 8% to 15% below consensus views. Conn's argued that high delinquency rates among its customers were partially to blame for the shortfall, and weak demand signaled that its customer base didn't have the capacity to spend as much as the company would have liked. Those results were consistent with what Best Buy showed in its holiday quarter, especially given all the promotional activity from other players in the electronics space.

By the time Conn's actually made its report, though, investors had gotten more comfortable with the company. Even though earnings and revenue were weak as expected, Conn's was somewhat more upbeat about the creditworthiness of its customers, and shares soared as a result. The ability to extend credit is a key differentiator for Conn's versus Best Buy, Lowe's, and other companies, as Conn's has traditionally served customers who wouldn't be able to get financing elsewhere.

Conn's also stands to gain from continued strength in the housing market. Just as Lowe's and other home-improvement specialists have ridden higher home prices to success, so too does Conn's have the potential to bolster its own revenue as shoppers get more comfortable spending on their homes with appliances, electronics, and other accessories to improve their standards of living.

In the Conn's earnings report, watch to see if the company can sustain its marked-down guidance for the full fiscal year. If its customers' credit continues to get healthier, then Conn's could have more room to run higher.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Click here to add Conn's to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers