The Zacks Analyst Blog Highlights: RadioShack, Sprint Nextel, AT&T, Target Corp. and Alexion Pharmaceuticals

CHICAGO, April 26, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: RadioShack Corp. (NYSE: RSH), Sprint Nextel Corp. (NYSE: S),  AT&T (NYSE: T), Target Corp. (NYSE: TGT) and Alexion Pharmaceuticals' (Nasdaq: ALXN).

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Here are highlights from Monday's Analyst Blog:

RadioShack Meets, Outlook Weak

RadioShack Corp. (NYSE: RSH) has declared first quarter 2011 financial results, which barely meet the Zacks Consensus Estimates. However, comparable store sales for the company-operated stores and kiosks (stores and kiosks opened at least a year) declined 0.6% year over year. This is a key retail performance indicator measuring growth from existing sales locations.

GAAP net income, in the first quarter of 2011, was $35.1 million or 33 cents per share compared with a net income of $50.1 million or 39 cents per share in the year-ago quarter. However, quarterly adjusted EPS was 35 cents, exactly in line with the Zacks Consensus Estimate.

Quarterly net revenue was $1,063.3 million, up 2.1% year over year, slightly below the Zacks Consensus Estimate of $1,368 million. The year-over-year increase in revenue was boosted by 11% growth in mobility (mostly wireless) businesses partially offset by lower sales of TV digital-to-analog converter boxes and related TV antennas, digital TV and digital music players.

Quarterly gross profit was $476 million compared with $491.9 million in the prior-year quarter. Gross margin was 44.8% in the reported quarter compared with 47.2% in the prior-year quarter. This was mainly due to the weak results of the company's T-Mobile business, adverse sales-mix towards low-margin products and higher promotional and clearance related to seasonal sales.

Quarterly Selling, General, and Administrative expenses were $386 million compared with $380.7 million in the year-ago quarter. Operating income in the first quarter of 2011 was $71.1 million, or 6.7% of sales, compared with $90.8 million, or 8.7% of sales in the year-ago quarter.

During the first quarter of 2011, RadioShack generated $60.8 million of cash from operations compared with a cash consumption of $14.6 million in the prior-year quarter. Free cash flow (cash flow from operations less capital expenditures) in the reported quarter was $46.3 million compared with a negative $28.9 million in the prior-year quarter.

At the end of the first quarter of 2011, RadioShack had $326.2 million of cash & cash equivalent compared with $569.4 million at the end of fiscal 2010. Total debt, at the end of the reported quarter was $335.7 million compared with $331.8 million at the end of fiscal 2010. At the end of the first quarter of 2011, debt-to-capitalization ratio was 0.28 compared with 0.28 at the end of fiscal 2010.

Segment wise Results

U.S. RadioShack Company-operated store segment, which is the prime contributor of total revenues, was down 0.5% year-over-year to $895.2 million.

Within this segment, Mobility sales were up 11% primarily due to higher Sprint Nextel Corp. (NYSE: S) and AT&T (NYSE: T) postpaid wireless sales, followed by prepaid wireless handsets but offset by lower T-Mobile postpaid wireless. Signature revenue was down 6.3% due to lower sales of digital-to-analog TV converter boxes and related TV antennas, media storage systems, partially offset by higher headphone sales.

Consumer Electronics sales were down 14.8% mainly attributable to lower sales of digital TVs, digital music players, netbooks but higher sales of laptops.

Kiosks segment revenue increased 50.5% year over year to $86.1 million. This was primarily due to the Kiosk rollout in Target Corp. (NYSE: TGT) Stores, which will be completed by mid-2011. At March 31, 2011, RadioShack had 887 Kiosks inside Target stores. The company expects to expand Target kiosks to approximately 1,450 locations by the end of June 2011.

Other services segment revenue decreased nearly 3.3% year over year to $82 million.

Outlook

Management has projected that total net sales and operating revenues will increase in the low-to mid-single-digit percentage range in 2011. This was mostly in line with the current Zacks Consensus Estimate.

Fiscal 2011 EPS will be in the range of $1.60 to $1.80 per share. Its mid-point of $1.70 is slightly below the current Zacks Consensus Estimate of $1.72. Capital expenditures are projected in the range of $100 million to $125 million in 2011.

Recommendation

We maintain our long-term Neutral recommendation on RadioShack. Currently, it holds a short-term Zacks #3 Rank (Hold) on the stock.

Alexion Tops on All Fronts

Alexion Pharmaceuticals' (Nasdaq: ALXN) first quarter 2011 earnings (excluding special items but including stock-based compensation) of $0.47 per share surpassed the Zacks Consensus Estimate by $0.05 and the year-ago earnings by $0.19. Earnings in the quarter benefited from an increase in revenues.

Alexion's revenues jumped 41% to $166.1 million in the reported quarter driven by strong Soliris (eculizumab) sales. Soliris is Alexion's only marketed product. It is approved for the treatment of paroxysmal nocturnal hemoglobinuria (PNH), a rare genetic blood disorder. The disorder can lead to anemia, fatigue, pain and breathing problems.

Revenues surpassed the Zacks Consensus Estimate of $165 million. The impressive revenues recorded in the reported quarter were indicative of the addition of new patients primarily in the US, Western Europe and Japan.

Alexion is working to expand the label of Soliris into other indications. In April 2011, Alexion submitted marketing applications in the US and the European Union (EU) seeking approval of the US Food and Drug Administration (FDA) and the European Medicines Agency (EMA), to market Soliris for treating patients suffering from atypical hemolytic uremic syndrome (aHUS). The disorder often leads to heart attack, stroke or kidney failure which can even prove to be fatal.

We note that the market for aHUS has a huge unmet need as patients suffering from the disorder have limited treatment options. Consequently, if Soliris is approved for treating the disease then the market potential for this product will further expand. Alexion is also studying Soliris in patients undergoing kidney transplantation, having a high risk of organ rejection. The condition is referred to as acute humoral rejection (AHR).

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