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Results: Rite Aid Corporation Confounded Analyst Expectations With A Surprise Profit

Simply Wall St
·4 min read

As you might know, Rite Aid Corporation (NYSE:RAD) recently reported its third-quarter numbers. It was overall a positive result, with revenues beating expectations by 4.7% to hit US$6.1b. Rite Aid also reported a statutory profit of US$0.08, which was a nice improvement from the loss that the analysts were predicting. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

Check out our latest analysis for Rite Aid

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, Rite Aid's five analysts currently expect revenues in 2022 to be US$24.3b, approximately in line with the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 88% to US$0.97. Before this earnings announcement, the analysts had been modelling revenues of US$24.1b and losses of US$1.41 per share in 2022. While the revenue estimates were largely unchanged, sentiment seems to have improved, with the analysts upgrading revenues and making a losses per share in particular.

These new estimates led to the consensus price target rising 103% to US$17.50, with lower forecast losses suggesting things could be looking up for Rite Aid. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Rite Aid analyst has a price target of US$21.00 per share, while the most pessimistic values it at US$16.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Rite Aid is an easy business to forecast or the the analysts are all using similar assumptions.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. From these estimates it looks as though the analysts expect the years of declining sales to come to an end, given the flat revenue forecast for next year. That would be a definite improvement, given that the past five years have seen sales shrink five years annually. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 3.5% per year. Although Rite Aid's revenues are expected to improve, it seems that it is still expected to grow slower than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Rite Aid's revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Rite Aid going out to 2023, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Rite Aid (1 is concerning) you should be aware of.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.