Why Roundy's (RNDY) Is Falling Today

Tickers in this article: RNDY

NEW YORK ( TheStreet) --  Roundy's was falling 8.4% to $6.18 on Thursday following a weaker-than-expected forecast for 2014.

The grocery store operator said it expects earnings of between 27 cents and 40 cents a share for the year. Analysts surveyed by Thomson Reuters expect earnings of 74 cents a share for the year, well above the company's current forecast.

While the company's forecast is weak, Rooundy's beat analysts' expectations during the fourth quarter. The company reported earnings of 25 cents a share, beating analysts' estimates of 17 cents a share. Roundy's reported revenue of $1 billion for the quarter, which was in-line with analysts' estimates.

Must read: Short Interest In Roundy's Expands By 44.7%

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TheStreet Ratings team rates ROUNDY'S INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about its recommendation:

"We rate ROUNDY'S INC (RNDY) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Food & Staples Retailing industry. The net income has significantly decreased by 52.5% when compared to the same quarter one year ago, falling from $7.93 million to $3.77 million.
  • The debt-to-equity ratio is very high at 3.34 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.36, which clearly demonstrates the inability to cover short-term cash needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Food & Staples Retailing industry and the overall market, ROUNDY'S INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ROUNDY'S INC is currently lower than what is desirable, coming in at 27.34%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.38% trails that of the industry average.
  • ROUNDY'S INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ROUNDY'S INC swung to a loss, reporting -$1.54 versus $0.20 in the prior year. This year, the market expects an improvement in earnings ($0.72 versus -$1.54).
  • You can view the full analysis from the report here: RNDY Ratings Report