Will Rite Aid (RAD) Beat Earnings Ests Again? - Analyst Blog

Rite Aid Corporation RAD, one of the leading drugstore chain operators, is slated to report its first-quarter fiscal 2015 results on Jun 19, 2014. In the last quarter, it posted a positive surprise of 150%. Let's see how things are shaping up for this announcement.

Factors Influencing this Quarter

Rite Aid, in its recently announced preliminary results for the first quarter, highlighted that its adjusted EBITDA for the quarter will trail its prior-year results as it witnessed higher-than-expected drug costs and reimbursement rate reductions in the first quarter of this year. Based on its projections for the first quarter and expected reductions in generic purchase price for the rest of the year, the company trimmed its adjusted EBITDA, net income and earnings per share forecasts for fiscal 2015. However, it retained its sales, comps and capital expenditure targets for the year.

Though the diminished forecast for the year is disappointing, the company's sustained focus on expanding pharmacy and clinical services through its Wellness+ customer loyalty program and remodeling of wellness stores raise our hopes. We believe that such measures will enable the company to broaden its customer base and boost top- and bottom-line performances.

Earnings Whispers?

Our proven model does not conclusively show that Rite Aid is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, #2 or #3 to surpass earnings estimates. However, this is not the case here, as you will see below:

Zero Zacks ESP: ESP (Expected Surprise Prediction) for Rite Aid is 0.00%. This is because the Most Accurate estimate stands at 4 cents per share, which is in line with the Zacks Consensus Estimate.

Zacks Rank #3 (Hold): Rite Aid's Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows they have the right combination to post an earnings beat:

Micron Technology Inc. MU has an Earnings ESP of +8.70% and a Zacks Rank #1 (Strong Buy).

Apollo Education Group, Inc. APOL with an Earnings ESP of +3.08% carries a Zacks Rank #3.

Lindsay Corporation LNN holds an Earnings ESP of +0.72% and a Zacks Rank #3.