Opposing Views For Rite Aid: Will Earnings Rise Or Fall?

Rite Aid Corporation RAD will announce its first quarter (fiscal 2016) financial results on Thursday morning, before the market opens, and opinions are divided.

According to Estimize, the Street expects to see a 50 percent year-over-year decline in earnings, while the crowd anticipates a 75 percent year-over-year increase.

In the first quarter of last year, the company reported earnings of $0.04 per share on revenue of $6.466 billion. For the current quarter, experts are modeling consensus earnings of $0.02 per share on revenue of $6.656 billion.

On the other hand, the crowd is projecting consensus earnings of $0.07 per share on revenue of $6.696 billion.

Related Link: Rite Aid: What Are The Experts Saying Ahead Of Earnings?

Moreover, it should be noted from the chart above that Rite Aid has a history of surpassing consensus by a wide margin. So, a beat could also be expected this quarter.

Opposing Views

The chart below features the evolution of sentiment over time.

As it can be appreciated, the crowd’s consensus remained on the same level, despite some ups and downs. However, the Street has been becoming increasingly bearish on results as earnings loomed; divergence occurred in early-April.

Set To Beat?

In a report published last Thursday, UBS analyst Steven Valiquette said he believes Rite Aid could beat consensus expectations on Thursday. Therefore, he reiterated a Buy rating and $10 price target on the stock.

Related Link: Rite Aid Could Beat Street Expectations: UBS Gives 3 Reasons Why

The analyst gives three reasons to expect a beat, the above linked article explains. “Firstly, savings from the McKesson Corporation MCK appeared to be accelerating towards the end of FY15 and are likely to have gained more steam in F1Q16 with the addition of Celesio generic volumes by McKesson.”

"Second, it appears generic drug price inflation has at least temporarily moderated during RAD's F1Q16, particularly in the final two months of the quarter in April in May," Valiquette said in the research note, adding, "A larger number of generic products y-o-y has witnessed price reductions in recent months, which is positive for RAD."

Finally, “given the historical sequential EBITDA trend for F4Q/F1Q in the last five years, the analyst expects the company to see upside in F1Q16.”