The struggling American franchise of electronics retailer, RadioShack Corp. ( RSH ), is slated to report third-quarter fiscal 2015 earnings before the opening bell on Dec 11, 2014.
In the previously concluded quarter, the company's earnings had missed the Zacks Consensus Estimate by 66.7%. Let's see how the company is positioned prior to the third-quarter earnings announcement.
Factors Likely to Influence This Quarter
RadioShack has reported dismal results over the past ten consecutive quarters, and this time as well it is unlikely to give any surprises. Declining foot traffic has severely affected RadioShack's business. The core retail businesses of RadioShack, namely, the consumer electronics platform (which includes digital TVs, digital music players and digital cameras) thus continues its free-fall.
Moreover, RadioShack is facing a cash crunch. At the end of the second quarter, RadioShack had $30.5 million in cash & cash equivalent compared with $109.6 million as of Feb 1, 2014.
Our proven model does not conclusively show that RadioShack is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate are poised at a loss of $1.03. Hence, the ESP is 0.00%.
Zacks Rank: RadioShack has a Zacks Rank #3 (Hold) which increases the predictive power of ESP; but when combined with a 0.00% ESP, it makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.
FedEx Corp. ( FDX ) has an Earnings ESP of +4.13% and a Zacks Rank #2 (Buy).
Adobe Systems Inc. ( ADBE ) has an Earnings ESP of +5.88% and a Zacks Rank #3.
Red Hat, Inc. ( RHT ) has an Earnings ESP of +3.70% and a Zacks Rank #3.