Earnings Previews: Carnival, Rite Aid

At Monday’s opening bell, stocks traded just slightly lower. Within an hour, the Nasdaq traded down by around 0.05%, the S&P 500 down less than 1%, and the Dow up about 0.3%. Tesla had given back a nice premarket gain of more than 3% that had accumulated after a user poll revealed that Elon Musk should give up his job as head of Twitter. Shortly before he tweeted his Sunday poll, he also tweeted that no one who can actually keep Twitter alive wants the job. There is more in our premarket report.

We already have previewed two companies (General Mills and Heico) set to report results after markets close Monday or before they open Tuesday. BlackBerry, FedEx, FuelCell Energy and Nike are expected to post results on Tuesday.

Here is a preview of two companies set to report results before U.S. markets open Wednesday morning.

Carnival

Cruise ship operator Carnival Corp. & PLC (NYSE: CCL) is scheduled to report quarterly results at 10:00 a.m. ET on Wednesday. Over the past 12 months, Carnival stock has dropped about 54%. Shares reached a 52-week high in February, but investors have been abandoning ship ever since. The company has posted 110 consecutive quarterly losses, beginning in the March quarter of 2020. The losses are expected to last through the August quarter, but if the economy slides or dives into a recession, the losses easily could continue.

Analysts remain cautious on the stock, with nine of 21 analysts having a Buy or Strong Buy rating and another nine assigning a Hold rating. At a recent price of around $8.20 a share, the upside potential based on a median price target of $10.00 is 18%. At the high target of $22.00, the upside potential is 168%.

For the company’s fourth quarter of fiscal 2022, analysts have forecast revenue of $3.95 billion, which would be down 8.2% sequentially and more than 200% year over year. The company reported revenue of $1.29 billion in the same period a year ago. The adjusted loss per share is forecast at $0.89, worse than the prior quarter’s loss per share of $0.58 but much better than last year’s quarterly loss of $1.72 per share. For the full fiscal year that ended in November, Carnival is expected to post a per-share loss of $4.67, compared with last year’s loss of $7.06 per share. Revenue is forecast to reach $12.34 billion, up nearly 550% year over year. Carnival posted revenue of $1.91 billion in fiscal 2021.

Carnival is expected to post EPS of $0.32 in its 2023 fiscal year and $1.15 in fiscal 2024. The stock’s 52-week range is $6.11 to $23.86. The company does not pay a dividend. Total shareholder return for the past year is a negative 53.9%.

Rite Aid

Over the past 12 months, retail drugstore operator Rite Aid Corp. (NYSE: RAD) has seen its share price plummet by almost 65%. The stock has been on a steady decline for the past year. The stock got a temporary boost in mid-August on chatter that the company might be a takeover target, but it was just chatter. Rite Aid in October completed a tender offer to repurchase some $200 million in 7.5% senior secured notes due in 2025. That gave shares a little boost, but it is pretty much gone now.

Just three analysts pay attention to the shares, and none rates them above a Sell. At a price of around $4.25 a share, the stock trades above the median target of $4.00. At the high target of $5.00, the potential upside is 17.6%.

Third-quarter revenue is expected to come in at $5.94 billion, up 0.6% sequentially but 4.7% lower year over year. The adjusted loss per share is forecast at $0.31, compared to a loss per share of $0.63 in the prior quarter and a loss per share of $0.15 in the second quarter of last year. For the full 2023 fiscal year ending in February, Rite Aid is expected to post a loss per share of $1.78, compared to last year’s loss of $1.51. Revenue is expected to drop by 3.4% to $23.73 billion.

Rite Aid is also not expected to post a profit in 2023, 2024 or 2025. The company’s enterprise value to sales multiple for each of the three fiscal years is 0.3. The stock’s 52-week range is $3.84 to $15.62. Rite Aid does not pay a dividend. Total shareholder return for the past year was negative 64.4%.

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