How Rite Aid Surprised Investors With Q3 Earnings

Rite Aid Corp. (NYSE: RAD) reported fiscal third-quarter 2020 results before markets opened Thursday. The drug store chain reported quarterly adjusted diluted earnings per share (EPS) of $0.54 on revenues of $5.46 billion. In the same period a year ago, Rite Aid reported an adjusted loss of $0.33 per share on revenue of $5.45 billion. Third-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.09 and $5.42 billion in revenue.

Net income from continuing operations soared year over year, from a net loss of $17.3 million to net income of $52.3 million. On a GAAP basis, third-quarter net income per share totaled $0.98 compared to a year-ago loss of $0.33 per share. The jump in net income was attributed to a $55.7 million gain on debt retirements and an increase of $15.3 million in adjusted EBITDA to $158.1 million.

Same-store sales in the company’s retail pharmacy segment dipped by 0.1%. The decline reflects a 0.1% gain in pharmacy sales and a 0.5% decline in front-end sales. Excluding the sale of cigarettes and tobacco products, front-end sales increased by 1%.

CEO Heyward Donigan said:

While we are pleased with these results, we have important work ahead of us to put our company on a path to long-term sustainable growth. We will soon reveal our comprehensive strategy that revitalizes Rite Aid retail pharmacies as fresh and relevant, leveraging the trust and expertise of our pharmacists in meeting the unique health and wellbeing needs of our communities. We are also investing in the expansion and integration of EnvisionRxOptions, particularly its services, technologies and clinical offerings. This will provide us scale to deliver lower total cost of care, an enhanced client experience and heightened consumer engagement. We are making great progress, and we are excited to share more details at our upcoming Analyst Day on March 16.

Rite Aid narrowed its adjusted EBITDA range for the 2020 fiscal year from a prior range of $510 million to $550 million to a new range of $515 million to $545 million. Revenue guidance was unchanged from a range of $21.5 billion to $21.9 billion. Full-year adjusted net income per share was raised from a prior range of flat to $0.56 to a new range of $0.13 to $0.55. The company also improved its expected net loss for the year from $235 million to $275 million to a new range of $174 million to $204 million.

Analysts had been looking for adjusted EPS of $0.05 and revenues of $21.64 for the full fiscal year. For the quarter, analysts have forecast EPS at $0.04 and revenues at $5.46 billion. Rite Aid did not provide fourth-quarter guidance.

The massive EPS beat and the seriously improved guidance for the fiscal year have sent investors on a buying frenzy. Shares traded up about 36.5% at $11.36 shortly after the opening bell Thursday. The stock’s 52-week range is $5.04 to $20.00, and the consensus price target on the stock is $6.25.

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