Rite Aid (RAD) Climbs Ahead of Earnings

NEW YORK (TheStreet) -- Rite Aid (RAD) is moving higher ahead of its fourth-quarter report before the bell Thursday, April 10.

By early afternoon, shares had climbed 2.5% to $6.26. 

The third-largest drugstore chain in the U.S. is expected to report revenue of $6.54 billion over the three months to February, a 1.4% year-over-year gain, according to analysts surveyed by Thomson Reuters.

Analysts anticipate net income of 4 cents a share, lower than profits of 13 cents a share in the year-ago quarter.

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TheStreet Ratings team rates RITE AID CORP as a Hold with a ratings score of C. The 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, compelling growth in net income and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including poor profit margins and weak operating cash flow."

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

  • RAD's revenue growth has slightly outpaced the industry average of 6.7%. Since the same quarter one year prior, revenues slightly increased by 1.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, RAD's share price has jumped by 270.85%, exceeding the performance of the broader market during that same time frame. 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.
  • RITE AID CORP's earnings per share declined by 42.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, RITE AID CORP turned its bottom line around by earning $0.12 versus -$0.42 in the prior year. This year, the market expects an improvement in earnings ($0.22 versus $0.12).
  • The gross profit margin for RITE AID CORP is currently lower than what is desirable, coming in at 29.91%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.12% trails that of the industry average.
  • Net operating cash flow has declined marginally to $244.01 million or 9.12% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, RITE AID CORP has marginally lower results.
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