RadioShack
(NYSE:RSH) reported first quarter earnings earlier this week that more
than doubled analyst estimates causing shares in the company to rise
more than 10% already this week.
The strong report comes despite negative stories out of Barron's and the Wall Street Journal along with a parody in
The Onion.
So, why is everyone wrong about this company? Well, RSH has recently
been restructuring itself by selling off its under-performing stores.
The
result has obviously been declining sales, which caused the bearish
sentiment we've seen in many financial publications. What many people
fair to recognize is RadioShack's gross margins, which have increased
from 48% to 52% while its earnings moved from $0.14 to $0.29 per share
last year.
The strategy is one that was pioneered by
Sears Holdings
(NYSE:SHLD) when it moved from $15 to $190 per share during its
turnaround. If RadioShack follows the same road, it is likely that
analysts will continue to remain bearish on the stock while its same
store sales continue to sink. However, investors who are willing to
weather this storm and realize the bottom-line improvements will see
blue skies. These factors make RSH a stock worth
watching closely over the next few quarters!
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