Will RadioShack (RSH) Disappoint this Earnings Season? - Analyst Blog

The struggling American franchise of electronics retail stores, RadioShack Corp. RSH, is slated to report first-quarter fiscal 2015 earnings before the opening bell on June 10, 2014.

The company has reported dismal quarterly numbers in all the last four quarters with an average negative earnings surprise of 309.8%, including earnings miss of 706.3% in the previously concluded quarter alone. Let's see how the company is positioned prior to the first-quarter earnings announcement.

Factors Likely to Influence this Quarter

RadioShack is facing bottom-line pressure at its lucrative wireless platform. The company is also suffering from costs associated with transitions from an adverse product mix to low-margin smartphones, and from T-Mobile to a wireless carrier partnership, along with underperformance of its businesses with Sprint.

Although management remains confident about achieving business from Verizon, RadioShack believes that the latter's business needs aggressive marketing efforts to enhance consumer awareness. We expect revenues from the Wireless division to remain weak for the rest of 2014.

Consumers nowadays prefer purchasing online to visiting retail stores. Declining foot traffic has severely affected RadioShack's business. Most gadget-freak consumers prefer tablets and smartphones today, which however, ring in less profit for the retail industry. The core retail businesses of RadioShack, namely, the consumer electronics (including digital TVs, digital music players, and digital cameras) platform thus continues its free fall.

Earnings Whispers?

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 52 cents. Hence, the ESP is 0.00%.

Zacks Rank: RadioShack has a Zacks Rank #5 (Strong Sell).

We caution investors against the stock going into the earnings announcement, as a Zacks Earnings ESP of 0.0% combined with a Zacks Rank #5 lowers the possibility of an earnings surprise.

Other Stocks to Consider

Here are some other companies to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.

Aaron's, Inc. AAN, with earnings ESP of +6.52% and a Zacks Rank #1 (Strong Buy).

Asbury Automotive Group, Inc. ABG, with earnings ESP of +12.04% and a Zacks Rank #2 (Buy).

hhgregg, Inc. HGG, with earnings ESP of +12.50% and a Zacks Rank #3 (Hold).

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