Why Rite Aid (RAD) Took a Massive Hit Today

NEW YORK (TheStreet) -- Shares of Rite Aid  (RAD) took a massive hit on Thursday following an earnings report.

While the drugstore operator reported a slight increase in revenue from the year-ago quarter, Rite Aid cut estimates for its fiscal year. The company now expects estimated earnings of between 17 cents and 23 cents per share for the fiscal year as opposed to the previous estimates of 18 cents to 27 cents per share.

Rite Aid increased revenue estimates for the year to between $25.3 billion and $25.425 billion from between $25.1 billion and $25.3 billion.

Shares of Rite Aid stock were down today by $0.59 (10.24%) as of the close of trading. By the end of trading, 69.40 million shares of RITE AID CORP exchanged hands as compared to its average daily volume of 29.23 million shares. The stock ranged in price between $5.14 to $5.44 after opening the day at $5.43 as compared to the previous trading day's close of $5.76. Overall, RITE AID CORP lagged the S&P 500 which was down 0.06%. Important items of note for RITE AID CORP and possible rationale for parts of today's stock move go as follows:

TheStreet Ratings team rates RITE AID CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate RITE AID CORP (RAD) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • RAD's revenue growth has slightly outpaced the industry average of 6.3%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Powered by its strong earnings growth of 160.00% and other important driving factors, this stock has surged by 427.35% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • Net operating cash flow has significantly increased by 341.63% to $79.47 million when compared to the same quarter last year. In addition, RITE AID CORP has also vastly surpassed the industry average cash flow growth rate of -54.43%.
  • The gross profit margin for RITE AID CORP is currently lower than what is desirable, coming in at 30.14%. Regardless of RAD's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.52% trails the industry average.

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