RadioShack Corp (RSH) has seen a resurgence thanks to its fast-growing wireless division. Analysts are expecting this growth to continue, and earnings estimates have been increasing as a result.
The company is a retailer specializing in consumer electronics with stores and kiosks throughout the U.S. and Mexico. It has a market cap of $2.7 billion.
Wireless Sales Drive Earnings
RadioShack reported earnings per share of 41 cents, a 5% increase over the same quarter in 2009. Earnings were in-line with the Zacks Consensus Estimate.
Net sales increased 4.7% year-over-year, with same-store sales growing a solid 6.7%. Much of this growth is attributable to a 61% increase in the company’s wireless platform. RadioShack also added T-Mobile as a postpaid wireless carrier, which helped boost sales.
Gross profit improved from 46.1% of sales to 47.5% in the quarter.
Strong Growth Ahead
Over half of RadioShack’s sales come from its fast-growing wireless division, which should help drive earnings growth in the future. The company has also began placing wireless kiosks inside of Target stores.
Estimates for 2010 and 2011 having been trending up nicely over the last few months, as seen in its Price & Consensus chart:
The Zacks Consensus Estimate for 2010 is $1.84, representing 13% growth over 2009 earnings per share. The consensus estimate for 2011 is $2.10, or 14% above 2010 EPS.
Room to Grow its Dividend
RadioShack has a dividend yield of 1.2%. Its payout ratio is low at just 15%. This gives the company plenty of room to raise its dividend rather significantly if it chooses.
RadioShack switched from paying its dividend quarterly to paying it annually in 2002. It hasn’t raised it since 2003, however.
The company also recently announced a $500 million share repurchase program – equivalent to about 19% of its total market cap.
RadioShack trades at just 11.6x forward earnings, a discount to the industry average of 16.1x. Its price to book value is 2.3, above the industry average of 1.9. Keep in mind, however, that its 20.0% return on equity is also higher than the industry average of 13.0%.
The company’s net profit margin of 5.0% also beats the industry average of 3.4%.
RadioShack is headquartered in Fort Worth, Texas. It is a Zacks #2 Rank (Buy) stock.
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