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Rite Aid (RAD) to Post Q4 Earnings: What's in the Offing?

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Rite Aid Corporation (RAD - Free Report) is slated to report fourth-quarter fiscal 2019 results on Apr 11. The company has pulled off positive bottom-line surprise in three of the trailing four quarters, the average beat being 66.7%.

The Zacks Consensus Estimate for the fiscal fourth quarter is pegged at loss of 3 cents. Estimates remained unchanged in the last 30 days. Further, the consensus estimate for revenues stands at $5,557 million, which reflects growth of 3% year over year.

Rite Aid Corporation Price and EPS Surprise

 

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

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

Factors at Play

Rite Aid is progressing well on its growth strategy, which is focused on leveraging retail pharmacies and EnvisionRxOptions PBM as well as health and wellness offerings. As clear evidence of its efforts to improve services, revenues at EnvisionRxOptions PBM improved 5.6% in third-quarter fiscal 2019 due to higher Medicare Part D memberships. Additionally, results validated strong progress in boosting retail and pharmacy benefits management businesses through a successful immunization business and other clinical pharmacy services.

Rite Aid expects to maintain this momentum by enhancing clinical services in the pharmacy business, boosting customer experience across channels, and investing in retail and pharmacy services businesses. The company expects Med D membership to grow more than 10% in fiscal 2019.

Additionally, the company continually works toward retaining strength in the Retail Pharmacy business. The renewal of its drug purchasing agreement with McKesson, which will extend for another 10 years, testifies its commitment to this business’ growth. This partnership will provide Rite Aid with a combination of competitive drug pricing and operational flexibility, which will enhance shareholder value. This extension also represents a key step in strengthening the pharmacy business, with continued focus on improving access to preferred and limited networks, and executing key script growth initiatives like further expanding clinical pharmacy offerings.

These efforts have significantly contributed to the company’s top and bottom-line growth in the past. Notably, earnings and sales growth in third-quarter fiscal 2019 were backed by strong revenues at the Retail Pharmacy and Pharmacy Services segments as well as robust same-store sales (comps). This should continue boosting results in the to-be-reported quarter.

However, the company’s soft outlook for fiscal 2019 is a cause of concern for investors. Despite strong fiscal third quarter, it narrowed its earnings and sales view for fiscal 2019. It now estimates sales of $21.8-$21.95 billion, with comps anticipated to increase 0.5-1%. Earlier, Rite Aid anticipated sales of $21.7-$22.1 billion for fiscal 2019, with comps anticipated to be flat to up 1%.

Adjusted EBITDA is projected to be $545-$570 million, narrowing from the previously mentioned $540-$590 million. Rite Aid now projects adjusted loss per share between 3 cents and 1 cent compared with adjusted net loss per share of 3 cents to income of 1 cent stated earlier.

Backed by a soft outlook, shares of this drug store retailer have lost 19.9% in the past month, wider than the industry’s decline of 8.9%. This reflects a negative sentiment on the stock ahead of the earnings release.

 


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 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 #2, which increases chances of an 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:

The Estee Lauder Companies Inc. (EL - Free Report) currently has an Earnings ESP of +1.49% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Bed Bath & Beyond Inc. (BBBY - Free Report) has an Earnings ESP of +2.17% and a Zacks Rank #3.

Whirlpool Corporation (WHR - Free Report) has an Earnings ESP of +0.43% and a Zacks Rank #3.

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