Earnings Previews: Bed Bath & Beyond, CarMax, Rite Aid


Shares of used car retailer CarMax Inc. (NYSE: KMX) have dropped nearly 45% of their value over the course of the past 12 months. The used car dealership sells, services and finances purchases at some 220 stores around the United States.

Last week, the company paid $186,480 to settle a discrimination complaint against the company and three other firms, including Capital One and Walmart. CarMax continues to struggle with its supply chain, interest rate hikes, and wary consumers. These issues, once expected to be in the rear-view mirror by the end of this year, are now expected to persist into 2023. The company has begun implementing its expansion strategy at a less-than-optimal time.

Of 19 analysts covering the stock, 11 have a Buy or Strong Buy rating and another six rate the shares at Hold. At a share price of around $80.00, the upside potential based on a median price target of $105.00 is 31.6%. At the high price target of $155.00, the upside potential is nearly 94%.

Second-quarter revenue is forecast at $8.55 billion, down 8.2% sequentially but 7% higher year over year. Adjusted EPS are expected to come in at $1.40, down 10.4% sequentially and by 18.6% year over year. For the full 2023 fiscal year ending in February, CarMax is expected to report EPS of $5.48, down 20.2%, on sales of $33.66 billion, up 5.5%.

CarMax stock trades at 14.6 times expected 2023 EPS, 13.6 times estimated 2024 earnings of $6.52 and 11.3 times estimated 2025 earnings of $7.10 per share. CarMax’s 52-week range is $76.00 to $155.98. CarMax does not pay a dividend, and total shareholder return over the past 12 months is negative 44.6%.

Rite Aid

Over the past 12 months, retail drugstore operator Rite Aid Corp. (NYSE: RAD) has seen its share price plummet by almost 56%. The stock last traded above the break-even line in early January. 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’s wholly owned pharmacy benefits management business, Elixir, is driving growth but also driving up costs. For a struggling company with about $6.1 billion in net debt and a market cap one-sixth of that, higher costs are not what investors want to see.

Just three analysts pay attention to the shares, and none rates the stock above a Sell. At a price of around $6.50 a share, the upside potential based on a median price target of $7.00 is 7.7%. Upside potential based on a high price target of $8.00 is 23.1%.

Second-quarter revenue is expected to come in at $5.86 billion, down 2.5% sequentially and 4.1% lower year over year. The adjusted loss per share is forecast at $0.46, compared to a loss per share of $0.60 in the prior quarter and a loss per share of $0.41 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 $1.21 compared to last year’s loss of $1.51. Revenue is expected to drop by 3.3% to $23.75 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 $4.68 to $15.65. Rite Aid does not pay a dividend. Total shareholder return for the past year was negative 55.8%.

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