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Will Rite Aid's (RAD) Soft Sales Hurt Earnings Again in Q4?
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Rite Aid Corporation is slated to report fourth-quarter fiscal 2018 results on Mar 29. 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 break-even bottom-line results that surpassed the Zacks Consensus Estimate of a loss of 2 cents per share. Further, the company has topped estimates in two of the trailing four quarters. Let’s see how things are shaping up prior to this announcement.
What to Expect?
The Zacks Consensus Estimate for the quarter under review is a loss of 2 cents per share, against the break-even results reported in the year-ago quarter. We note that the Zacks Consensus Estimate has been stable in the last 30 days. Further, analysts polled by Zacks expect revenues of $5.54 billion, down 34.9% from the prior-year quarter.
Rite Aid Corporation Price, Consensus and EPS Surprise
Further, Rite Aid’s shares have declined by a significant 26.3% in the past month, wider than the industry’s decline of 6.2%. This suggests a negative sentiment for the stock, ahead of fourth-quarter earnings release.
Factors at Play
Rite Aid remains on track with the transferring of stores and related assets to Walgreens (WBA - Free Report) in a phased manner. So far, the company has transferred 1,651 stores and related assets to Walgreens, generating net cash proceeds of $3.6 billion. This will be used to pay down debt and strengthen liquidity position.
Further, the company has agreed to merge with grocer Albertsons to fend off the rising competition from Amazon (AMZN - Free Report) . Moreover, Rite Aid’s efforts to boost market share through wellness remodels and other strategic initiatives bode well.
However, Rite Aid is grappling with dismal top-line trends in recent quarters. Notably, Rite Aid has delivered negative sales surprise in four of the trailing six quarters due to soft comps as well as a decline in revenues at key business segments. Additionally, third-quarter fiscal 2018 marked its third straight quarter of year-over-year sales decline. Sales have declined 4.9%, 4.4% and 5.6%, respectively, in the first, second and third quarters of fiscal 2018. Rite Aid’s revenues continue to be hurt by soft comps as well as a decline in revenues at key business segments — Retail Pharmacy and Pharmacy Services.
Retail Pharmacy segment, which engages in selling prescription drugs, health and beauty products, and personal care items, reported revenue declines of 4.9%, 3.4% and 3% in the first, second and third quarter of fiscal 2018, respectively. The segment revenues were persistently hurt by soft same-store sales and unfavorable reimbursement rates. Notably, unfavorable reimbursement rates have been a challenge for the company’s top-line for nearly two years now.
Meanwhile, revenues for the Pharmacy Services segment, which provides PBM (pharmacy benefit management) services and a range of pharmacy-related services, dropped 5.6%, 8.7% and 12.2% for the first, second and third quarter of fiscal 2018, respectively. Revenues at the Pharmacy Services segment declined due to an election to take part in lesser Medicare Part D regions and a fall in commercial business.
Rite Aid’s comps dropped 2.5% in third-quarter, which can be attributed to the fall in pharmacy and front-end sales. Notably, its comps have declined for six straight quarters now, reporting declines of 3.9% and 3.4%, respectively, in the first and second quarters of fiscal 2018. Moreover, comps dipped 2.5%, 3.4% and 3% in the second, third and fourth quarter of fiscal 2017.
Though we remain a little skeptical about the company’s performance in the fourth quarter, let’s wait and see what’s really in store for the company.
What the Zacks Model Unveils?
Our proven model does not conclusively show that Rite Aid is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Rite Aid has an Earnings ESP of 0.00% as both the Zacks Consensus Estimate and Most Accurate Estimate are pegged at a loss of 2 cents per share. While the company’s Zacks Rank #3 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.
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:
lululemon athletic inc. (LULU - Free Report) has an Earnings ESP of +1.30% and a Zacks Rank #3.
Bed Bath & Beyond Inc. has an Earnings ESP of +0.07% and a Zacks Rank #3.
Can Hackers Put Money INTO Your Portfolio?
Earlier this month, credit bureau Equifax announced a massive data breach affecting 2 out of every 3 Americans. The cybersecurity industry is expanding quickly in response to this and similar events. But some stocks are better investments than others.
Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.
Image: Bigstock
Will Rite Aid's (RAD) Soft Sales Hurt Earnings Again in Q4?
Rite Aid Corporation is slated to report fourth-quarter fiscal 2018 results on Mar 29. 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 break-even bottom-line results that surpassed the Zacks Consensus Estimate of a loss of 2 cents per share. Further, the company has topped estimates in two of the trailing four quarters. Let’s see how things are shaping up prior to this announcement.
What to Expect?
The Zacks Consensus Estimate for the quarter under review is a loss of 2 cents per share, against the break-even results reported in the year-ago quarter. We note that the Zacks Consensus Estimate has been stable in the last 30 days. Further, analysts polled by Zacks expect revenues of $5.54 billion, down 34.9% from the prior-year quarter.
Rite Aid Corporation Price, Consensus and EPS Surprise
Rite Aid Corporation Price, Consensus and EPS Surprise | Rite Aid Corporation Quote
Further, Rite Aid’s shares have declined by a significant 26.3% in the past month, wider than the industry’s decline of 6.2%. This suggests a negative sentiment for the stock, ahead of fourth-quarter earnings release.
Factors at Play
Rite Aid remains on track with the transferring of stores and related assets to Walgreens (WBA - Free Report) in a phased manner. So far, the company has transferred 1,651 stores and related assets to Walgreens, generating net cash proceeds of $3.6 billion. This will be used to pay down debt and strengthen liquidity position.
Further, the company has agreed to merge with grocer Albertsons to fend off the rising competition from Amazon (AMZN - Free Report) . Moreover, Rite Aid’s efforts to boost market share through wellness remodels and other strategic initiatives bode well.
However, Rite Aid is grappling with dismal top-line trends in recent quarters. Notably, Rite Aid has delivered negative sales surprise in four of the trailing six quarters due to soft comps as well as a decline in revenues at key business segments. Additionally, third-quarter fiscal 2018 marked its third straight quarter of year-over-year sales decline. Sales have declined 4.9%, 4.4% and 5.6%, respectively, in the first, second and third quarters of fiscal 2018. Rite Aid’s revenues continue to be hurt by soft comps as well as a decline in revenues at key business segments — Retail Pharmacy and Pharmacy Services.
Retail Pharmacy segment, which engages in selling prescription drugs, health and beauty products, and personal care items, reported revenue declines of 4.9%, 3.4% and 3% in the first, second and third quarter of fiscal 2018, respectively. The segment revenues were persistently hurt by soft same-store sales and unfavorable reimbursement rates. Notably, unfavorable reimbursement rates have been a challenge for the company’s top-line for nearly two years now.
Meanwhile, revenues for the Pharmacy Services segment, which provides PBM (pharmacy benefit management) services and a range of pharmacy-related services, dropped 5.6%, 8.7% and 12.2% for the first, second and third quarter of fiscal 2018, respectively. Revenues at the Pharmacy Services segment declined due to an election to take part in lesser Medicare Part D regions and a fall in commercial business.
Rite Aid’s comps dropped 2.5% in third-quarter, which can be attributed to the fall in pharmacy and front-end sales. Notably, its comps have declined for six straight quarters now, reporting declines of 3.9% and 3.4%, respectively, in the first and second quarters of fiscal 2018. Moreover, comps dipped 2.5%, 3.4% and 3% in the second, third and fourth quarter of fiscal 2017.
Though we remain a little skeptical about the company’s performance in the fourth quarter, let’s wait and see what’s really in store for the company.
What the Zacks Model Unveils?
Our proven model does not conclusively show that Rite Aid is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Rite Aid has an Earnings ESP of 0.00% as both the Zacks Consensus Estimate and Most Accurate Estimate are pegged at a loss of 2 cents per share. While the company’s Zacks Rank #3 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.
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:
Walgreens Boots Alliance Inc. currently has an Earnings ESP of +2.19% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
lululemon athletic inc. (LULU - Free Report) has an Earnings ESP of +1.30% and a Zacks Rank #3.
Bed Bath & Beyond Inc. has an Earnings ESP of +0.07% and a Zacks Rank #3.
Can Hackers Put Money INTO Your Portfolio?
Earlier this month, credit bureau Equifax announced a massive data breach affecting 2 out of every 3 Americans. The cybersecurity industry is expanding quickly in response to this and similar events. But some stocks are better investments than others.
Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.
Download the new report now>>