Following the first quarter earnings announcement on April 24,
some of the analysts covering
) have reduced while most have retained their estimates. We believe
that the mixed response from analysts is the result of reduced
comparable store sales results and weak higher-margin smartphone
First Quarter Highlights
GAAP net loss from continuing operations in the first quarter of
2012 was $8 million or 8 cents per share compared with a net income
of $31.4 million or 30 cents per share in the year-ago quarter.
Reported loss of 8 cents per share was nowhere near the Zacks
Consensus Estimate of an income of 5 cents.
Quarterly net revenue was $1,008.3 million, down 0.9% year over
year, missing the Zacks Consensus Estimate of $1,065 million. The
year-over-year decrease in revenue was primarily attributable to
lower sales from the U.S. RadioShack company-operated stores.
Gross margin was 39.1% in the reported quarter compared with
44.7% in the year-ago quarter. This was mainly due to the sales mix
that favored lower-margin smartphones and other mobile devices,
further impacted by the higher percentage of mobility sales arising
from the expansion of kiosks within
) stores. Comparable store sales for the company-operated stores
and kiosks (stores and kiosks open for at least a year) decreased
4.2% year over year.
Agreements of Analysts
Of the 16 analysts covering the stock, the last 7 days saw one
analyst lowering the estimates for the second and third quarters of
fiscal 2012, while none raised the estimate for the same
One out of the 16 analysts lowered the estimate for fiscal 2012,
while another raised. However, for fiscal 2013, one out of the 15
analysts providing estimates made a downward revision.
Currently, the Zacks Consensus EPS Estimate for the second
quarter of fiscal 2012 is pegged at 4 cents. The estimated annual
decline is 86.67%. Similarly, for the third quarter 2012, the
current Zacks Consensus EPS Estimate of 8 cents indicates a decline
of 43.33% year over year.
Magnitude of Estimate Revisions
With respect to the downward revision of estimates, the current
Zacks Consensus Estimate for the second quarter of 2012 is pegged
at 4 cents, down by a penny during the last 7 days. Similarly, for
the third quarter of fiscal 2012, the current Zacks Consensus
Estimate decreased by 1 cent to 8 cents for the same period.
For fiscal 2012, the current estimate decreased 2 cents to 31
cents in the last 7 days. Likewise, for fiscal 2013, the current
Zacks Consensus Estimate declined 6 cents, from $1.95 to $1.89.
With respect to earnings surprises, the company fared poorly in
the last four quarters, reflecting positive surprise in only one
quarter. RadioShack produced a negative earnings surprise of 5
cents or 260% in the last quarter.
There is upside potential (essentially a proxy for future
earning surprises) of 25.00% and 12.50% for the ongoing quarter and
the next quarter of fiscal 2012, respectively, while no surprises
are expected for fiscal 2012. However, for fiscal 2013, the Zacks
Consensus Estimate has the potential to increase 5.13%.
RadioShack is facing increasing competitive pressure from other
large retail stores like
Best Buy Co. Inc.
), online shopping stores and mobile carriers, which directly sell
handsets to customers. Increasing competitive threat from several
fronts may result in lower wireless sales going forward.
A precipitous fall in demand for the non-wireless category
products, along with huge gross margin pressure, may hurt
profitability going forward. We, thus, maintain our long-term
Underperform recommendation for RadioShack.
Currently, RadioShack has a Zacks #5 Rank, implying a short-term
Strong Sell rating on the stock.
About Earnings Estimate Scorecard
As a PhD from MIT, Len Zacks proved over 30 years ago that
earnings estimate revisions are the most powerful force impacting
stock prices. He turned this ground breaking discovery into two
of the most celebrating stock rating systems in use today. The
Zacks Rank for stock trading in a 1 to 3 month time horizon and
the Zacks Recommendation for long-term investing (6+ months).
These "Earnings Estimate Scorecard" articles help analyze the
important aspects of estimate revisions for each stock after
their quarterly earnings announcements. Learn more about earnings
estimates and our proven stock ratings at:
BEST BUY (BBY): Free Stock Analysis Report
RADIOSHACK CORP (RSH): Free Stock Analysis
TARGET CORP (TGT): Free Stock Analysis Report
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