RadioShack Should Rally Into Earnings - Jeffries

Jefferies is out with an interesting call on RadioShack (NYSE:RSH) saying consensus estimates for the electronics retailer are likely too low. Firm thinks we could see as much as $0.05-$0.10 upside to the consensus 2Q07 EPS estimate of $0.24 their estimate is $0.30.

Also, the consensus FY'07 EPS estimate of$1.49 and their $1.55 forecast could be as much as $0.15-$0.20 too low. It should be noted that management has provided little insight and did not update its original "low-ball" EPS guidance of $1.00-$1.20 for FY07.

As a result of a recent 13% sell-off and the potential for 2Q07 EPS to beat current consensus expectations, they think Shack shares could rally around next Monday's (7/30) earnings report. That said, in the days following Shack's 2Q07 earnings report, as estimates are revised and future earnings expectations are reassessed, the firm thinks that many of the momentum investors driving the stock will be more inclined to look for the exits than to add new positions.

Maintains Underperform rating, as they continue to believe that the majority of opportunities to improve profitability have been identified. Moreover, RadioShack's competitive positioning and customer relevance are likely to continue to erode.

Notablecalls: This is certainly one controversial call. But I love the chart! I love the comments regarding the possible sizable beat. The thing has a 23% short interest! It's down 13% in a relatively short period of time.

Despite Jeffco's cautious comments regarding valuation and lack of opportunities to improve ops, I think the stock goes up from here. The firm is just looking to cover their backs in case the stock should go down. It won't. I expect to see a nice bounce.