The analyst firm raised its 2015 EPS estimates for Conn's to $1.60 a share from its previous estimate of $1.45 a share. Oppenheimer also raised its 2016 EPS estimates for the company to $2 a share from $1.40 a share.
The upgrade and EPS estimate increases are due to a better retail environment and softer credit trends, according to Oppenheimer analysts Brian Nagel and Dan Farrell.
Conn's is a holding company which through its retail stores, provides products and services.
"Our rating upgrade to Outperform from Perform reflects a short-term, speculative call on shares and is predicated on our view that the market is currently underpricing the potential for CONN to successfully divest its loan portfolio," the analysts wrote. "Fundamental risks remain for CONN. That said, we expect that investors would look more favorably upon potentially enhanced EPS and cash flow prospects of a CONN business model unencumbered by an at-times volatile in-house sub-prime lending division."
Separately, TheStreet Ratings team rates CONN'S INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate CONN'S INC (CONN) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CONN's revenue growth has slightly outpaced the industry average of 12.4%. Since the same quarter one year prior, revenues rose by 18.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Even though the current debt-to-equity ratio is 1.18, it is still below the industry average, suggesting that this level of debt is acceptable within the Specialty Retail industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 5.06 is very high and demonstrates very strong liquidity.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has significantly decreased by 44.3% when compared to the same quarter one year ago, falling from $27.74 million to $15.46 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Specialty Retail industry and the overall market, CONN'S INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: CONN Ratings Report