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What's in the Cards for Conn's (CONN) This Earnings Season?

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Conn's, Inc. (CONN - Free Report) is slated to release second-quarter fiscal 2018 results on Sep 7. The question lingering in investors’ minds is whether this specialty retailer of furniture, home appliances and consumer electronics, and provider of consumer loans will be able to post a positive earnings surprise in the quarter to be reported. Notably, Conn's bottom line has surpassed the Zacks Consensus Estimate in the trailing four quarters, by an average of 80.9%. So, let’s see how things are shaping up prior to this announcement.

Conn's, Inc. Price and EPS Surprise

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

What to Expect?

The current Zacks Consensus Estimate for the quarter under review is pegged at a loss of 2 cents, compared with a loss of 4 cents reported in the year-ago period. We note that the Zacks Consensus Estimate has remained stable over the last 30 days. However, analysts polled by Zacks expect revenues of roughly $371.9 million, down 6.6% from the year-ago quarter.

Factors at Play

Conn's has been gaining from its differentiated business strategy, which has also helped it surge 53.7% so far this year, outpacing the industry’s 24.2% growth. The company remains focused on undertaking strategic initiatives to solidify its credit division. Further, the company recently inked a deal with Aaron's, Inc.’s (AAN - Free Report) subsidiary — Progressive Leasing, per which the latter will offer lease-to-own payment solutions to those customers who are not eligible for Conn’s proprietary credit offering. The implementation of this deal was done ahead of plan, which makes management hopeful about tapping greater lease-to-own sales.

However, some analysts remain skeptical, owing to Hurricane Harvey’s impact on Conn’s Houston stores. Also, unfavorable delinquencies and Trump’s immigration plan may impede results, per these analysts. Further, the company’s retail sales in the last quarter were hampered by soft consumer patterns and underwriting changes made in fiscal 2017. These factors may be a threat to Conn’s upcoming performance too. In fact, management expects comps to decrease in a range of 12-15% in second-quarter fiscal 2018. Given the mixed signals, we prefer to wait and see if Conn’s can pull a surprise this earnings season too.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Conn's is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with ourEarnings ESP Filter.

Conn's currently carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, the company has an Earnings ESP of -100.00%, as the Most Accurate Estimate of a loss of 3 cents is wider than the Zacks Consensus Estimate. The combination of Conn's Zacks Rank #3 and negative ESP makes surprise prediction difficult.

Stocks with Favorable Combination

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:

Restoration Hardware Holdings Inc. (RH - Free Report) has an Earnings ESP of +2.88% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

G-III Apparel Group, Ltd. (GIII - Free Report) has an Earnings ESP of +4.76% and a Zacks Rank #3.

Whirlpool Corporation (WHR - Free Report) has an Earnings ESP of +0.38% and a Zacks Rank #3.

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