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Can Rite Aid (RAD) Return to Solid Trend with Q2 Earnings?


Drug store retailer, Rite Aid Corporation RAD is slated to report second-quarter fiscal 2017 results on Sep 22. In the last quarter, the company delivered a negative earnings surprise of 16.7%, which marked its first earnings miss after seven consecutive beats. Let’s see how things are shaping up for this announcement.

RITE AID CORP Price and EPS Surprise

RITE AID CORP Price and EPS Surprise | RITE AID CORP Quote

Factors Influencing This Quarter

Rite Aid’s earnings in the last quarter were a letdown mainly owing to pharmacy reimbursement rate pressures, as drug purchasing efficiencies were short of expectations. Further, management anticipates drug cost reductions to remain below expectations in the near term, though an improvement is likely in second-half fiscal 2017. Nonetheless, these factors raise concerns about the company’s upcoming performance. Also, risks related to greater industry consolidation and competition remain threats for Rite Aid.

However, the company’s constant focus on strengthening its portfolio of health and wellness services, coupled with its consistent endeavors to enhance pharmacy and clinical services bode well. So, let’s see if Rite Aid’s upcoming release can get it back to its positive surprise trajectory.

Earnings Whispers

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

Zacks ESP: Rite Aid currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 3 cents.

Zacks Rank: Rite Aid carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

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

Coca-Cola European Partners Plc CCE has an Earnings ESP of +4.11% and a Zacks Rank #3.

Carnival Corp. CCL has an Earnings ESP of +2.13% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Finish Line Inc. FINL has an Earnings ESP of +1.89% and a Zacks Rank #3.

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