Here's What To Expect From Rite Aid Earnings Thursday

Apr. 9.14 | About: Rite Aid (RAD)

Rite Aid Corp. (NYSE:RAD) is set to report FQ4 2014 earnings before the market opens on Thursday, April 10th. Rite Aid is one of the largest retail pharmacy chains in the country. In February, competitor CVS Caremark (NYSE:CVS) announced it would end all tobacco and cigarettes sales by October 1. Rite Aid and Walgreen (WAG) are yet to announce an end to tobacco sales, but there is mounting pressure for pharmacies to give up their tobacco sales and focus on the health of customers. CVS, WAG, and RAD all had great years in 2013, and Rite Aid's revenue is expected to continue growing. This quarter, Wall Street is expecting Rite Aid to post year-over-year sales growth of 1.5%, although EPS is predicted to fall by 8c per share. Here's what investors expect from RAD Thursday.

The information below is derived from data submitted to the Estimize.com platform by a set of Buy-Side and Independent analyst contributors.

Click to enlarge

(Click Here to see Estimates and Interactive Features for Rite Aid)

The current Wall Street consensus expectation is for Rite Aid to report 5c EPS and $6.550B revenue, while the current Estimize.com consensus from 14 Buy-Side and Independent contributing analysts is 6c EPS and $6.544B in revenue. This quarter, the buy side, as represented by the Estimize.com community, is expecting Rite Aid to beat the Wall Street consensus on EPS, but come up a few million dollars short on revenue.

By tapping into a wider range of contributors, including hedge-fund analysts, asset managers, independent research shops, students, and non-professional investors, Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time, but more importantly, it does a better job of representing the market's actual expectations. It has been confirmed by Deutsche Bank Quant. Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.

The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case, we are seeing a small difference between the two groups' expectations.

Click to enlarge

The distribution of estimates published by analysts on the Estimize.com platform range from 5c to 7c EPS and from $6.492B to $6.600B in revenues. This quarter, we're seeing a narrow distribution of estimates on EPS for Rite Aid and a wider distribution of estimates on revenue.

The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A narrow distribution of EPS estimates signaling more agreement in the market, which could mean less volatility post-earnings. In this case, we are seeing a tight range of profit expectations, with much more uncertainty around sales.

Click to enlarge

Over the past 4 months, the Wall Street EPS consensus fell from 6c to 5c, while the Estimize consensus both started and ended the period at 6c. Meanwhile, the Wall Street revenue consensus climbed from $6.495B to $6.550B, while the Estimize forecast also increased from $6.532B to $6.544B. Timeliness is correlated with accuracy, and upward analyst revenue revisions at the end of the quarter are often a bullish indicator.

Click to enlarge

The analyst with the highest estimate confidence rating this quarter is BradHewitt91, who projects 6c EPS and $6.540B in revenue. BradHewitt91 is ranked 13th overall among over 4,000 contributing analysts. Over the past year, BradHewitt91 has been more accurate than Wall Street in forecasting EPS and revenue 53% and 49% of the time respectively throughout 655 estimates. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research, which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, BradHewitt91 is expecting Rite Aid to report in line with the Estimize consensus on EPS, but come up slightly short of the community's expectations on revenue.

Rite Aid stock had a great year in 2013, returning 254%. Shares were beaten down to prices as low as $1.43 at the start of last year, but 4 consecutive quarters of beating Wall Street expectations on both the top and bottom line gave RAD a considerable boost. This quarter, contributing analysts on the Estimize.com platform have lower expectations than the Street, and are projecting yoy revenue growth of 1.4%, compared to 0% yoy revenue growth reported in FQ4 of last year.

Disclosure: None