Tuesday, January 25, 2011

RadioShack (NYSE:RSH) Shares Crushed on Negative Preannouncement

Shares of RadioShack Corp. (NYSE:RSH) were hammered Monday on the negative earnings preannouncement, and the news CEO Julian Day was stepping down, effective immediately.

FBR noted, "This morning (Monday), RadioShack preannounced that 4Q10 EPS would be down at $0.50–$0.54 per share versus the Street consensus of $0.67. Concurrently, the company announced that CEO Julian Day would be retiring effective immediately, with Jim Gooch, the company's CFO, replacing him...The underperformance of the third and most recently added carrier contract, T-Mobile, also raises questions about the addition of a fourth carrier. While we derive strategic value with the shares at higher levels, in the event that financial sponsor interest resurfaces, we find it difficult to recommend the stock, given the uncertainty that is currently underway.

"We adjust our 2010 EPS estimate to $1.68 from $1.76 on the heels of the company's preannouncement. This compares with the Street consensus estimate of $1.83 prior to the company's preannouncement. We also adjust our 2011 EPS estimate to $1.62 from $1.78, which compares with the Street estimate of $2.08. For 2012, we adjust our EPS estimate to $1.74 from $1.92 versus the Street consensus of $2.16."

FBR Capital reiterates a "Market Perform" rating on RadioShack Corp. (RSH), which closed Monday at $15.62, dropping $1.99, or 11.30 percent. FBR lowered their price target on RadioShack from $20 to $19.

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