Why Rite Aid (RAD) Stock Is Down Today

NEW YORK (TheStreet) -- Rite Aid  (RAD) fell on high volume in morning trading Wednesday in sympathy with peer company Walgreen  (WAG).

Walgreen announced it would purchase the remaining 55% of shares of British health and beauty retail operator Alliance Boots it does not already own for $15.3 billion in a cash-and-stock deal. The company also said it would keep its headquarters in Chicago, which squashed any hope of reorganization through a tax inversion that would allow Walgreen to pay less U.S. taxes.

Both Rite Aid and CVS Caremark  (CVS) were down Wednesday morning. Rite Aid was down 4.66% to $6.24 at 9:53 a.m.

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Separately, 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 also find weaknesses including deteriorating net income and poor profit margins."

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

  • RAD's revenue growth has slightly outpaced the industry average of 4.3%. Since the same quarter one year prior, revenues slightly increased by 2.7%. 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.
  • Net operating cash flow has increased to $239.75 million or 29.98% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 13.84%.
  • 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 ($0.35 versus $0.22).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Food & Staples Retailing industry. The net income has significantly decreased by 53.8% when compared to the same quarter one year ago, falling from $89.66 million to $41.45 million.
  • The gross profit margin for RITE AID CORP is currently lower than what is desirable, coming in at 29.48%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.64% trails that of the industry average.
  • You can view the full analysis from the report here: RAD Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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