RadioShack Earnings Preview: Is The Company Going Bankrupt?

Small-cap electronics retailer RadioShack RSH is tentatively set to release its fiscal first-quarter earnings results on Tuesday, June 3, ahead of the opening bell, although the date and time has not been able to be confirmed.

Not surprisingly, Wall Street is less than optimistic heading into the report. An article from the NYSE Post on May 19 suggests that the company is on the "threshold" of bankruptcy after its credit rating was downgraded at Fitch Ratings two weeks ago.

Furthermore, according to data from Markit, RadioShack's recent credit default swaps implied a 40 percent chance of default by the end of 2014 and a 95 percent chance of default within five years.

Things just aren't looking good at the company, whose market-cap has dwindled to $144 million.

Over the last five years, shares have lost roughly 91 percent and over the preceding decade the stock is down more than 95 percent.

Related: Survey: What Do Investors Expect For The Upcoming Week?

Analyst Expectations

Heading into Tuesday's report, Wall Street analysts have consensus earnings per share estimates calling for a loss of $0.50. The high estimate on the street is for a loss of $0.21 with a low estimate calling for a loss of $0.73. In the year ago period, the company reported a loss of $0.35 per share.

Over the last three months analysts have actually become more pessimistic about RadioShack's quarterly earnings outlook. Ninety days ago, the consensus was for a loss of $0.31. During that time, RadioShack shares have plummeted another 52 percent.

On the sales front, analysts have consensus revenue estimates of $749.2 million, which represents a year-over-year contraction of around 10 percent. The high estimate is $805.50 million with a low estimate of $674.1 million. In the year ago quarter, the company reported sales of $849.00 million.

Analyst Color

RadioShack's poor performance in fiscal Q4 shocked Wall Street, and investors are likely to have little tolerance for more disappointment in the first quarter. Analysts at Wedbush reiterated their Underperform rating on the stock after the March quarter, citing growing losses, declining sales and margin erosion. The firm has a $1 price target on the stock.

The company had planned on closing up to 1,100 stores over the next year, but this cost-cutting move was blocked by lenders. Wedbush analysts wrote that "the creditors clearly are in control of the ship, and in our view, the ship is sinking."