The Zacks Analyst Blog Highlights: RadioShack, Leap Wireless International, Google, MetroPCS Communications and Perrigo

Zacks

For Immediate Release

Chicago, IL – September 06, 2012 – 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 Corp. (RSH), Leap Wireless International Inc. (LEAP), Google Inc. (GOOG), MetroPCS Communications Inc. (PCS) and Perrigo Company (PRGO).

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Here are highlights from Wednesday’s Analyst Blog:

RadioShack, Leap Join Forces

 Struggling electronics retailer RadioShack Corp. (RSH) has collaborated with Cricket Communications, a wholly-owned subsidiary of Leap Wireless International Inc. (LEAP) to offer no-contract wireless services from its stores across the U.S.

Initially, RadioShack will offer Huawei’s Mercury Ice, a smartphone powered by Google Inc’s. (GOOG) Android operating system and is priced at $149.99. The company will also offer Huawei Pillar, a feature phone with full keyboard and is priced at $39.99.

RadioShack has vowed to bring in two more smartphones by the end of September and the entire range will be offered from Cricket Communication’s stable.  

The feature phone customers can choose either from RadioShack’s wireless service offer of a $25 plan/month with 300 voice minutes and unlimited texts or a $35/month plan with 1000 voice minutes and unlimited texts.

The smartphone plans include a $50/month and $60/month offering, which limits download speed after 1GB and 2.5GB of data usage respectively. RadioShack is also offering two more expensive plans with higher data caps.

Fort Worth, Texas-based RadioShack has been struggling for quite some time and recently declared dismal financial results for the second quarter of 2012 with both the top and bottom line well below the Zacks Consensus Estimate. The company suspended its dividend, owing to weak result in the reported quarter. 

The uncapped data plan market is growing and is particularly attractive among the lower income group or customers who don’t want to be tied down within any contract. We believe this new offering will help RadioShack to attract customers who prefer data options without any cap or throttling.

Additionally, it is expected that it will increase its retail footprint as online shoppers can’t avail this offer.  However, the company could face competition from rival MetroPCS Communications Inc. (PCS), which has recently introduced a no-strings-attached unlimited plan for $55/month. 

The current Zacks Consensus Estimate for RadioShack Corp. is pegged at a loss of 16 cents for the third quarter of 2012 with a growth rate estimate of (205.00%). For the years 2012 and 2013, the Zacks Consensus Estimates stand at a loss of 31 and 12 cents with a growth rate of (133.00%) and 63.23%, respectively.

Recommendation

RadioShack currently enjoys a long-term Neutral recommendation. Additionally, it holds a short-term Zacks #5 Rank (Strong Sell) on the stock.

 

Perrigo Cut to Neutral

 We have downgraded Perrigo Company (PRGO) to Neutral from Outperform following the disappointing revenue numbers put out by the company in the fourth quarter of fiscal 2012 (ended June 30, 2012). The stock carries a Zacks #3 Rank (Hold rating) in the short run.

Perrigo’s fourth quarter fiscal 2012 revenues of $832 million fell short of the Zacks Consensus Estimate of $854 million, primarily due to weakness in the Consumer HealthCare (CHC) segment.

Total revenues were, however, up 18% year over year aided by the inclusion of $58 million of net sales from Paddock Laboratories (acquired by Perrigo in 2011) and $10 million from CanAm Care (whose assets were acquired by Perrigo in January 2012).

Apart from the CHC segment, Rx Pharmaceuticals (generic) segment sales, which were very encouraging in the first three quarters of fiscal 2012, were also disappointing in the final quarter, flat sequentially.

Moreover, Perrigo, which narrowly beat the Zacks Consensus Estimate in terms of earnings mainly due to a low tax rate, expects fiscal 2013 earnings in the range of $5.30–$5.50, up 6%–10% from $4.99 per share recorded in fiscal 2012. The forecasted growth range is below the growth exhibited by the company in the last few years. The revenue miss and the below par guidance had a negative impact on the shares.

 

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