On Apr 11, Zacks Investment Research upgraded Rite Aid Corporation (RAD) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Rite Aid has been witnessing rising earnings estimates on the back of better-than-expected fourth-quarter fiscal 2014 results and it provided an impressive guidance for fiscal 2015. Moreover, this well-known drugstore chain retailer has beaten the Zacks Consensus Estimate by an average of 225% in the trailing four quarters. The long-term expected earnings growth rate for this stock is 17.5%.
Rite Aid reported fourth-quarter adjusted earnings of 10 cents per share, registering year-over-year growth of 42.9% and handily beating the Zacks Consensus Estimate of 4 cents. The improved bottom-line results were primarily attributable to strong revenues and Rite Aid’s key turnaround initiatives.
Rite Aid's fourth-quarter revenues rose 2.2% year over year to $6,597.5 million and surpassed the Zacks Consensus Estimate of $6,551.0 million. Top-line growth was driven by 21% rise in comparable-store sales (comps), which benefited from rise in pharmacy sales, slightly offset by weak front-end sales.
Following the superb quarterly performance, Rite Aid now expects sales for fiscal 2015 to range between $26.0 billion and $26.5 billion, with comps growth in the band of 2.5% to 4.5%. Furthermore, adjusted earnings before interest, taxes, depreciation and amortization (:EBITDA) for the fiscal 2015 are anticipated to be in the range of $1.325–$1.40 billion.
Rite Aid, which trails only Walgreen Co. (WAG) and CVS Caremark Corp. (CVS) in size, expects its net income for fiscal 2015 to be between $313.0 million and $423.0 million or 31–42 cents per share.
The Zacks Consensus Estimate for fiscal 2015 increased 9.4% to 35 cents per share as most of the estimates were revised upward over the last 7 days. For fiscal 2016, half of the estimates were revised higher over the same time frame, lifting the Zacks Consensus Estimate by 4.7% to 45 cents per share.
Other Stocks That Warrant a Look
Apart from Rite Aid, another drug store retailer worth investment is Herbalife Ltd. (HLF), which has a Zacks Rank #2 (Buy).