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Rite Aid (RAD) Q4 Earnings: Is a Negative Surprise in Store?

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Rite Aid Corporation is slated to report fourth-quarter fiscal 2017 results on Apr 25. The big question facing investors is whether this drug store retailer will be able to deliver a positive earnings surprise in the quarter to be reported.

Last quarter, the company reported a negative earnings surprise of 33.3%. In fact, the company has mixed record of earnings surprises in recent quarters. Further, it has underperformed the Zacks Consensus Estimate by an average of 24.2% in the trailing four quarters. Let’s see how things are shaping up prior to this announcement.

Rite Aid Corporation Price and EPS Surprise

 

Rite Aid Corporation Price and EPS Surprise | Rite Aid Corporation Quote

Factors Influencing This Quarter

Shares of Rite Aid have underperformed the broader industry on a year-to-date basis due to dismal earnings performance in recent quarters and delay in the Rite Aid-Walgreens merger. Rite Aid’s shares have declined 44.9% year to date, wider than the Zacks categorized Retail-Pharmacies and Drug Stores industry's fall of 3%.



The company posted dismal earnings results in two of the last four quarters. Results for third-quarter fiscal 2017 were hurt by soft Retail Pharmacy segment revenues and a fall in adjusted EBITDA. Moreover, challenges related to the pharmacy reimbursement rate, which have been affecting the results in recent quarters, is anticipated to linger throughout fiscal 2017. Additionally, risks related to increased industry consolidation and greater competition cannot be ignored.

Estimates have been going down ahead of the fourth-quarter earnings release. The Zacks Consensus Estimate for the fiscal fourth quarter has declined to a loss estimate of 1 cent from the earnings estimate of 4 cents, in the last 30 days. Also, estimate for fiscal 2017 has declined 44% to 5 cents and the fiscal 2018 estimate has dipped to break-even from the prior estimate of 9 cents.

Furthermore, the current Zacks Consensus Estimate of loss of 1 cent per share for fourth-quarter fiscal 2017 reflects 109.5% decline from the prior-year quarter. However, analysts polled by Zacks expect revenues of $8.39 billion for the fiscal fourth quarter, reflecting nearly 1.5% growth from the year-ago quarter.

However, Rite Aid’s stringent focus on cost management, alongside strengthening its portfolio of health and wellness services has been impressive. Its constant endeavors to enhance pharmacy and clinical services also bode well. Nonetheless, let’s see if Rite Aid’s growth drivers can help counter the challenges this time around.

Earnings Whispers

Our proven model does not conclusively show that Rite Aid is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Rite Aid currently has an Earnings ESP of -200.00%. This is because both the Most Accurate estimate of a loss of 3 cents is wider than the Zacks Consensus Estimate of a loss of 1 cent. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Rite Aid currently has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Panera Bread Company , scheduled to release earnings on Apr 25, currently has an Earnings ESP of +2.21% and a Zacks Rank #2 (Buy).

Newell Brands Inc. (NWL - Free Report) , scheduled to report earnings on May 8, currently has an Earnings ESP of +13.79% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Amazon.Com, Inc. (AMZN - Free Report) , expected to release earnings on Apr 27, currently has an Earnings ESP of +7.62% and a Zacks Rank #3 (Hold).

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