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Factors Likely to Shape Rite Aid's (RAD) Earnings in Q3

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Rite Aid Corporation (RAD - Free Report) is slated to report third-quarter fiscal 2019 results on Dec 19.

The company pulled off positive bottom-line surprise in two of the trailing four quarters, the average beat being 50%. The company posted break-even results in the prior-year quarter.

Rite Aid Corporation Price, Consensus and EPS Surprise


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

The Zacks Consensus Estimate for the fiscal third quarter is pegged at loss of 2 cents. Estimates remained unchanged in the last 30 days. Further, the consensus estimate for revenues stands at $5,484 million, which reflects growth of 2.5% year over year.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Following in-line bottom-line results in second-quarter fiscal 2019, Rite Aid reiterated its lowered adjusted EBITDA view while widened its net loss expectations. The company earlier slashed adjusted EBITDA guidance for fiscal 2019 in response to the unfavorable trends in the generic drug market after the bidding activity. Consequently, it estimates adjusted EBITDA of $540-$590 million for fiscal 2019. Further, the company negatively revised net (loss) income guidance due to the inclusion of impairment charges incurred in the fiscal second quarter. Management now expects net loss of $440-$485 million in fiscal 2019 compared with net loss of $125-$170 million mentioned earlier. These are likely to hurt results in the to-be-reported quarter.

Further, the company has a dismal top-line trend, having lagged estimates in four of the trailing five quarters. So far this year, shares of this drug store retailer have lost 50.1% against the industry’s 8.2% rally.


After two failed mergers, Rite Aid is striving to return to growth trajectory through the execution of standalone strategy, aimed at capitalizing on growth potential. Management is leveraging retail pharmacies and EnvisionRxOptions PBM as well as health and wellness offerings. Further, changes to board and governance reflect its commitment to turning around performance. Backed by these initiatives, front-end and pharmacy comps improved significantly in the last reported quarter. Further, the company reiterated sales and comps view for fiscal 2019. Rite Aid continues to estimate sales of $21.7-$22.1 billion for fiscal 2019, with comps anticipated in the range of flat-to-up 1%. These factors might provide some cushion to the fiscal third quarter results.

Though these efforts enhance the company’s prospects, we remain a little skeptical about the near-term performance due to its bleak bottom-line outlook for fiscal 2019.

A Look at the Zacks Model

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 currently has a Zacks Rank #3 (Hold), which increases the power of earnings beat. But its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

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

Boot Barn Holdings, Inc. (BOOT - Free Report) currently has an Earnings ESP of +6.85% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Darden Restaurants, Inc. (DRI - Free Report) has an Earnings ESP of +4.40% and a Zacks Rank #2.

Costco Wholesale Corporation (COST - Free Report) has an Earnings ESP of +0.09% and a Zacks Rank #3.

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