RadioShack Shows Signs of Bankruptcy: Should You Dump? - Analyst Blog

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On Sep 19, 2014, we issued an updated research report on RadioShack Corp. ( RSH ). RadioShack recently reported dismal financial numbers for the second quarter of fiscal 2015. Both the top and the bottom line significantly missed the Zacks Consensus Estimate.

RadioShack reported adjusted loss per share of $1.00, wider than the Zacks Consensus Estimate of a loss of 59 cents. Meanwhile, total revenue came in at $673.8 million, down 21.8% year over year and below the Zacks Consensus Estimate of $742 million. Notably, comparable store sales for company-operated stores and kiosks (stores and kiosks that have been operational for at least a year) were down 16.9% in the reported quarter, mainly affected by traffic declines and slowdown in the mobility business.

Nowadays, consumers prefer making online purchases to visiting retail stores - a trend that has potentially resulted in RadioShack's core Consumer Electronics retail business witnessing a secular downtrend. RadioShack is also facing a cash deficit situation and may file bankruptcy if the company fails to improve its cash balance.

On Sep 11, however, RadioShack received a boost after the company stated that it is in talks with its bondholder, lenders, shareholders and landlords to make a possible arrangement for capital in order to avoid bankruptcy. It is also considering options like a sale of the company, a near-term recapitalization or debt restructuring. Recently, Wall Street Journal reported that RadioShack is assessing a $585 million financing package in order to save itself from bankruptcy. UBS will organize $325 million, whereas Standard General will give $260 million, which will substitute the $585 million loan and credit facility from GE Capital, a part of General Electric Company ( GE ).

RadioShack currently has a Zacks Rank #4 (Sell).

Other Stocks to Consider

Better-ranked stocks worth considering in this sector include Mercadolibre, Inc. ( MELI ) and World Energy Solutions, Inc. ( XWES ). Both these stocks sport a Zacks Rank #1 (Strong Buy).

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RADIOSHACK CORP (RSH): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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