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.
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."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RAD's revenue growth has slightly outpaced the industry average of 6.5%. Since the same quarter one year prior, revenues slightly increased by 2.2%. 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.
- RITE AID CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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 increased its bottom line by earning $0.22 versus $0.12 in the prior year. This year, the market expects an improvement in earnings ($0.38 versus $0.22).
- Compared to its closing price of one year ago, RAD's share price has jumped by 182.15%, exceeding the performance of the broader market during that same time frame. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
- The gross profit margin for RITE AID CORP is currently lower than what is desirable, coming in at 30.13%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.83% trails that of the industry average.
- Net operating cash flow has decreased to $194.13 million or 11.90% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: RAD Ratings Report