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Zacks Industry Rank Analysis Highlights: Best Buy, Conn’s, GameStop, Corning and SPDR S&P Retail

Zacks.com releases the latest Zacks Industry Rank. Stocks featured in this week’s analysis include Best Buy Co., Inc. (NYSE: BBY), Conn's, Inc. (Nasdaq: CONN), GameStop Corp. (NYSE: GME), Corning Incorporated (NYSE: GLW) and SPDR S&P Retail (NYSE: XRT).

Zacks Industry Rank Analysis is written by Charles Rotblut, CFA, Senior Market Analyst for Zacks.com.

This week: Better Profits for Electronics Stores?

Profit forecasts for electronics retailers are rising in a significant manner. During just the past 2 weeks, more than 40% of all earnings estimates for Retail-Consumer Electronics have been revised upwards - a very bullish sign.

The biggest beneficiary of the optimism has been Best Buy Co., Inc.

A couple of weeks ago, BBY shocked analysts with better-than-expected fiscal fourth-quarter earnings of $1.61 per share. Though same-store sales were down, the dollar amount of the average purchase rose. More importantly, gross margins widened by 90 basis points.

BBY also provided upbeat guidance. The company expects fiscal 2010 profits to total between $2.50 and $2.90 per share; the consensus had called for earnings of $2.36 per share.

Nearly all of the covering analysts adjusted their projections to be inline with BBY's guidance. The consensus estimate is now at $2.77 per share.

It's not just Best Buy that is responsible for the overall improvement in the industry group's outlook, however.

Competitor Conn's, Inc. (Nasdaq: CONN) also beat estimates and said that gross margins improved. Video game retailer GameStop Corp. (NYSE: GME) generated same-store sales growth of 9.6%. Both companies provided an upbeat outlook.

Without a doubt, the demise of Circuit City is helping all 3 companies.

Another trend helping BBY and CONN is that consumers are still buying LCD TVs. Some of this might be attributable to the digital conversion, though declining prices and aging analog sets are also playing a role.

Corning Incorporated (NYSE: GLW) recently said that it has been "experiencing increasing glass orders." As a result, the company is now guiding for first-quarter glass volume of flat to down 5%, versus previous guidance for a 20% to 25% drop. (GLW is a major manufacturer of glass for flat panel displays.)

Finally, tough economic conditions are causing more consumers to stay at home then go out. A DVD or a video game can cost less than taking a family of four out for a night. This trend favors companies like BBY, CONN and GME.

Finally, as I discussed last month, retail earnings in general have not been as bad as feared. This has led to multiple positive revisions across the retail sector.

CONN is a Zacks #1 Rank ("strong buy") stock. BBY and GME are Zacks #2 Rank ("buy") stocks. All 3 are classified in Retail-Consumer Electronics (http://at.zacks.com/?id=4570). GLW is a Zacks #2 Rank stock classified in Fiber Optics (http://at.zacks.com/?id=5483).

Related ETFs

There are a few exchange-traded funds that focus on retailers. SPDR S&P Retail (NYSE: XRT) provides good overall coverage of the sector. Furthermore, Best Buy is the fund's fourth-largest holding, though no single position accounts for more than 2.5% of XRT's portfolio.

Zacks "Profit from the Pros" e-mail newsletter offers continuous coverage of the industries and the stocks poised to outperform the market. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=2564.

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Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contacts:

Zacks.com
Charles Rotblut, CFA
312-265-9352
pr@zacks.com
Visit: www.Zacks.com

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