RadioShack Shares: Value Buy Alert

RadioShack is bucking the challenging retail environment as it continues to increase sales. The company isn’t a one quarter wonder. It has surprised on estimates 4 consecutive quarters by an average of 17.70%. RadioShack has a forward P/E of 11.12.

Company Description

RadioShack Corporation (RSH) is a consumer electronics retailer that operates in malls and neighborhood stores.

The company, a Zacks #1 Rank (Strong Buy), was founded in 1921 in Boston and now has 6,000 retail stores in the United States and 700 wireless phone kiosks.

Second Quarter Comparable Store Sales rise 6.9%

On July 24, RadioShack reported second quarter earnings that beat Wall Street estimates by 29.63%. Net income was $41.4 million, or 32 cents per share, compared to $47 million, or 34 cents per share in the second quarter of 2007. Adjusting for items, EPS were 35 cents per share. Analysts expected 27 cents per share.

Total sales rose $60 million to $995 million from $935 million in the same period a year ago. Sales increased 7.5% in company-owned stores, 6.1% in dealer/franchise outlets and 29.8% for the on-line business. The kiosk business fell by 2.7%.

Comparable store sales rose 6.9% year-over-year fueled by initial sales of digital-to-analog TV converter boxes, strong sales in GPS devices and increased sales in video gaming. All was not roses, as the Sprint post-paid business dragged down sales. RadioShack said that division continues to have a negative impact on the company’s performance.

RSH Begins Share Repurchase Program

On July 24, RadioShack announced that its board of directors authorized a new $200 million share repurchase program. The company anticipates purchases to be made from time to time. The program does not have an expiration date.

Consensus Estimates Rise for the Third Quarter and the Full Year

Analysts are bullish on the rest of 2008 despite the tough retail environment. Third quarter estimates are up 5 cents in the last 60 days to 36 cents per share from 31 cents per share.

For the full year, consensus estimates are up 13.3% to $1.78 from $1.57 per share.

Value Fundamentals

RadioShack’s forward P/E is 11.12. Its price-to-book is 2.94. The company has a stellar five year return on equity (ROE) of 31.32%. The company also pays a dividend, with a current yield of 1.30%.

Posted in Categories: Contributor, External Research, Stocks, USA.

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