XLI Industrial Select Sector

If you've watched the 3-year decline of "big box" appliance and electronics retailer Best Buy (BBY), you may have thought that this is a business model to stay away from. I certainly thought so until I discovered Conn's (CONN), a family-built retailer with over 50 stores in Texas, 6 in Louisiana, and newer footholds in Oklahoma City, Albuquerque, and Tucson.

Conn's roots go back to 1890 where it started life as a plumbing company in Beaumont, Texas. In 1934, Carroll Wayne Conn, Sr bought the company and within a few years began selling refrigerators and gas ranges. He didn't become the Sam Walton of appliances, but his legacy built a brand that Texans have come to know and trust.

Now they sell just about everything durable for the home, including entertainment electronics, furniture, mattresses and lawn and garden equipment -- and they've built a loyal customer base doing it with a focus on service and satisfaction. The company was also an early innovator of the in-house financing model in the 1960s.

Sales and Profits Grow With Store Build-Out

Since coming public nearly a decade ago, Conn's has continued to expand, with quarterly revenues averaging over $200 million for the past 5 years. The recent Q4FY2013 sales result topped $250 million for the first time since 2008.

This sales growth is propelled by expansion with new locations built around their HomePlus store concept. Pricing power and margin improvement keep their earnings expanding as well.

The company declared strong results on Apr 3, 2013, with EPS of 54 cents a share that surged 58.8% from the 34 cents earned in the year-ago quarter. Comparable-store sales for the quarter climbed 7%.

And Conn's has outperformed the Zacks Consensus Estimate in 4 out of last 5 quarters, with an average beat of 13.4%.

Revenue from the retail segment increased 9.7% to $208.7 million and retail gross margins expanded 720 basis points to 36.9%. Credit card segment revenue soared 14.5% to $41.6 million.

Buoyed by healthy results, management now projects fiscal 2014 earnings between $2.40 and $2.50 with expected comparable-store sales growth of 3% to 8%.

Following this strong report, analysts have scrambled to raise estimates, taking the first and second quarters of fiscal 2014 (the next 2 quarters) up by 29% and 20% to 54 cents and 59 cents, respectively. For fiscal 2014, the Zacks Consensus Estimate has vaulted nearly 20% in the past two weeks from $2.08 to $2.48 per share.

Here's the visual on this reaction by analysts to catch-up with company growth...