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

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Jul 27, 2011, 09:30 ET

CHICAGO, July 27, 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 (NYSE: RSH), Sprint Nextel Corp. (NYSE: S), AT&T (NYSE: T) Target Corp. (NYSE: TGT) and Verizon (NYSE: VZ).

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Here are highlights from Tuesday's Analyst Blog:

RadioShack Underperforms

RadioShack Corp. (NYSE: RSH) declared its second-quarter 2011 financial results, which fell below the Zacks Consensus Estimates. The comparable-store sales for the company-operated stores and kiosks (stores and kiosks opened at least a year) declined 7.8% year over year. This is a key retail performance indicator measuring growth from existing sales locations.

GAAP net income, in the second quarter of 2011 from continuing operations, was $23.5 million or 23 cents per share compared with a net income of $49.5 million or 39 cents per share in the year-ago quarter. However, quarterly adjusted (excluding one-time items) EPS was 30 cents, well below the Zacks Consensus Estimate of 38 cents.

Quarterly net revenue was $941.9 million, down 2.1% year over year, significantly lower than the Zacks Consensus Estimate of $1,034 million. The year-over-year fall in revenue primarily attributable to the decline in Sprint Nextel Corp. (NYSE: S) and T-mobile wireless sales together with lower sales of digital-to-analog TV converter boxes and related TV antennas, digital cameras, and digital music players.

Quarterly gross profit was $432.1 million compared with $457.2 million in the prior-year quarter. Gross margin was 45.9% in the reported quarter compared with 47.5% in the prior-year quarter. This was mainly due to the weak result of the company's T-Mobile business, adverse sales-mix toward low-margin products and higher promotional and clearance related to seasonal sells.

Quarterly Selling, General, and Administrative expenses were $364.3 million compared with $347 million in the year-ago quarter. Operating income in the second quarter of 2011 was $48.9 million, or 5.2% of sales compared with $90.6 million, or 9.4% of sales in the year-ago quarter.

During the first half of 2011, RadioShack generated $101.5 million of cash from operations compared with $42 million in the prior-year period. Free cash flow (cash flow from operations less capital expenditures) in the reported period was $60 million compared with $16.3 million in the prior-year period.

At the end of the second quarter of 2011, RadioShack had $552.2 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 $662.2 million compared with $331.8 million at the end of fiscal 2010. At the end of the second quarter of 2011, debt-to-capitalization ratio was 0.45 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 revenue, was down 8.7% year over year to $797.8 million.

Within this segment, Mobility sales were down 7.1% primarily due to lower Sprint Nexteland T-Mobile postpaid wireless sales, partially offset by higher AT&T (NYSE: T) postpaid wireless and tablet sales. Signature revenue was down 5.8% 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 17% mainly attributable to lower sales of digital TVs, digital music players, and digital cameras.

Other segment revenue increased 63% year over year to $144.1 million. This was primarily due to kiosk roll-outs in Target Corp. (NYSE: TGT) stores. On June 30, 2011, RadioShack had 1481 kiosks inside Target stores.

Restructuring Continues

In a separate statement today, RadioShack announced that the company has entered into an agreement with the largest wireless operator of the U.S., Verizon (NYSE: VZ), to provide Verizon's postpaid and prepaid wireless products and services in its company-operated stores nationwide from September 15, 2011.

However, RadioShack will discontinue its offerings of T-Mobile wireless products and services in its company-operated stores from September 14, 2011.

Recommendation

We maintain our long-term Neutral recommendation on RadioShack. Currently, it holds a short-term Zacks #4 Rank (Sell) on the stock.

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