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Conn's Inc. (CONN) to Report Q4 Earnings: What's in Store?

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Conn’s Inc. (CONN - Free Report) is slated to report fourth-quarter fiscal 2017 results on Apr 4. The big question facing investors is whether this durable consumer goods retailer will be able to deliver a positive earnings surprise in the quarter to be reported.

In the last quarter, the company had delivered a positive surprise of nearly 57.9%. However, the company has underperformed the Zacks Consensus Estimate in two of the trailing four quarters, recording an average negative surprise of 92.1%. Let’s see how things are shaping up for this announcement.

Conn's, Inc. Price and EPS Surprise

 

Conn's, Inc. Price and EPS Surprise | Conn's, Inc. Quote

Factors Influencing This Quarter

Higher delinquency rates and the decision to exit video game products, digital cameras and certain tablets have been weighing on Conn’s sales for a while now. Evidently, the company’s total revenue lagged the Zacks Consensus Estimate in the preceding quarter. Additionally, the refinements made to the underwriting model impacted fiscal third-quarter comparable store sales (comps) by nearly 1000 basis points (bps).

Further, the company provided a dismal guidance for the fiscal fourth quarter anticipating 10% decline in comps. Moreover, retail gross margin as a percentage of total net sales, is anticipated between 37.0–37.5%, and selling, general and administrative expenses as a percentage of total revenue in the range of 27.75–28.75%. Conn’s anticipates the provision for bad debts to be in the band of 16.75–17.75% of the average total customer portfolio balance.

Further, this is reflected in Conn’s stock performance that has underperformed the broader industry on a year-to-date basis. The stock has declined 33.6% year to date, lagging the Zacks categorized Retail–Consumer Electronics industry’s growth of 1.7%.



Given the dismal comps trend over the past few months and the high delinquencies, we remain cautious about the company’s performance in the upcoming quarter.

Meanwhile, the company’s retail business has been performing well amid the tough retail environment and remains on track to improve the performance of its credit business and consequently the overall profitability. Also, its turn-around strategic initiatives are likely to impact the company's financial results, going forward.

Earnings Whispers

Our proven model does not conclusively show that Conn’s is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Conn’s Earnings ESP is currently pegged at 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both are pegged at a loss of 11 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Conn’s Zacks Rank #3 (Hold) increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Pinnacle Foods Inc. , expected to report earnings on Apr 27, has an Earnings ESP of +2.17% and a Zacks Rank #2 (Buy).

The Children’s Place Inc. (PLCE - Free Report) , expected to report earnings on May 16, has an Earnings ESP of + 1.24% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Newell Brands Inc. (NWL - Free Report) , expected to release earnings on May 5, has an Earnings ESP of +13.79 and a Zacks Rank #3.

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