RadioShack Earnings Preview: Here’s What Serious Investors are Watching

The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.

RadioShack (NYSE:RSH) will report Q4:12 (December) results before market open on Tuesday, February 26, and host a call at 6:00am PT (dial-in (866) 271-6130, Passcode: RadioShack, webcast: ir.radioshackcorporation.com).

We expect Q4 revenue in line with our below-consensus estimate, while EPS could be materially lower than our estimate as margin deterioration persists. We expect Q4 revenue of $1.32 billion and EPS of $0.00, compared to consensus for revenue of $1.37 billion and EPS of $(0.05). The company did not provide specific guidance, but expects a net income decline in 2012. Consensus EPS has declined dramatically after each of the last three  earnings misses (Q4 EPS consensus declined to $(0.05) from $0.12 last quarter), and we believe it is likely that Q1 consensus estimates will decline further after the Q4 report.

Margin deterioration likely persisted into Q4. We expect further margin erosion in Q4 due to the mix shift towards lower-margin smartphones and mobile devices, compounded by further margin pressure at the soon-to-be-closed Target kiosks. As of its Q3 earnings call, management forecasted weak sales and said it expected gross margin compression to continue at least through the end of the year, stating that the quarter was off to a weak start. Wireless competition was fierce, and likely exacerbated the weakness throughout the holidays.

RadioShack and Target (NYSE:TGT) will…