RadioShack Earnings: Margins SHRINK, Stock Crashing

Increasing costs did not help S&P 500 (NYSE:SPY) component RadioShack Corporation (NYSE:RSH) in the second quarter as the company reversed to a loss. RadioShack is a retailer offering consumer electronic goods and services through its RadioShack store chain and non-RadioShack branded kiosk operations.

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RadioShack Corporation Earnings Cheat Sheet

Results: Reported a loss of $21 million (21 cents per diluted share) in the quarter. RadioShack Corporation had a net income of $24.9 million or 24 cents per share in the year-earlier quarter.

Revenue: Rose 1.2% to $953.2 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: RadioShack Corporation beat the mean analyst estimate of 3 cents per share. Analysts were expecting revenue of $971.5 million.

Quoting Management: Jim Gooch, president and chief executive officer of RadioShack Corp., said, “Overall, our business performed below expectations during the second quarter. We were disappointed in our gross margin rate performance, as the initiatives we have under way have not yet generated enough momentum to improve the trend. However, we were pleased with the sales growth generated in the mobility category of our business. Importantly, we saw incremental improvement throughout the quarter as we successfully connected with our customer base and drove sales growth in this key category through effective promotions and the expansion of our Target Mobile centers. We are also seeing continued stability and improvement in the signature category. Our primary operating focus continues to be on stabilizing gross margins and aggressively managing our cost structure.”

Key Stats:

Last quarter was the fifth in a row that the company saw shrinking gross margins, as they fell 8.1 percentage points from the year-earlier quarter to 37.8%. In that span, margins have contracted an average of 4.8 percentage points per quarter on a year-over-year basis.

The company topped expectations last quarter after falling short of forecasts in the first quarter with a loss of 8 cents versus a mean estimate of net income of 5 cents per share.

Over the last five quarters, revenue has fallen an average of 2.3% year-over-year. The biggest drop came in the second quarter of the last fiscal year, when revenue fell 6.9% from the year-earlier quarter.

Looking Forward: Over the past ninety days, the average estimate for the third quarter has fallen from 14 cents per share to 8 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. For the fiscal year, the average estimate has moved down from 59 cents a share to 30 cents over the last ninety days.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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