Why Rite Aid (RAD) Stock Is Plummeting Today

NEW YORK (TheStreet) -- Rite Aid (RAD) stock is tumbling Thursday after announcing preliminary financial results for its first quarter and warning of continued softness over fiscal 2015. In morning trading, shares had fallen 11.9% to $7.49.

For its May-ended first quarter, the drugstore chain expects net income between $35 million and $45 million with adjusted earnings of 4 cents a share. Those results were almost half analysts' expectations -- analysts surveyed by Thomson Reuters forecast $76 million in net income and earnings of 8 cents a share. In a statement, the company said based on pharmacy margin trends the results are lower due to higher-than-expected drug costs, a result of delays in realizing expected price reductions for generic drugs. 

Over fiscal 2015 ending February, Rite Aid guides for net income between $298 million and $408 million, or 30 cents to 40 cents a share. Analysts had anticipated profits at the high-end of guidance with net income of $392.4 million, or 39 cents a share. 

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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 and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow."

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