Radio Shack Shares Plunged: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of electronics retailer Radio Shack (NYS: RSH) were shorting out today, losing as much as 15% in intraday trading after the company reported third-quarter earnings.
So what: Calling it a "transition period" for the company, CEO Jim Gooch expressed optimism about Radio Shack's position in the mobility market, particularly after bringing Verizon (NYS: VZ) into its portfolio.
Transition or not, though, investors simply weren't happy with the fact that the company's third-quarter earnings badly missed analysts' estimates. On a GAAP basis, the company reported a nonexistent profit for the quarter, though after backing out certain one-time costs -- which Wall Street usually excludes from its targets -- the per-share profit came to $0.15 for the quarter. Analysts had expected $0.38 per share.
Now what: While the quarterly results may not be much to look at, the company made another announcement that should be interesting to shareholders as well as investors on the sidelines. Opting use its cash flow and the significant cash on its balance sheet to pay its investors, Radio Shack announced that it is doubling its dividend to $0.50 per year and authorized $200 million in share buybacks. At the current share price, that would boost the stock's yield to 4.3% and take some 17 million shares out of circulation. While that alone doesn't make the stock a buy, it could be a very good reason for investors to take a closer look.
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