Rite Aid Earnings: An Early Look

Earnings season has begun, and on Thursday, Rite Aid (NYSE: RAD  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Rite Aid has been the third wheel of the U.S. drugstore industry for a long time, as it has struggled to reach profitability even as its main rivals have seen substantial growth in sales and earnings over the years. Can Rite Aid ever recover? Let's take an early look at what's been happening with Rite Aid over the past quarter and what we're likely to see in its quarterly report.

Stats on Rite Aid

Analyst EPS Estimate

($0.02)

Year-Ago EPS

($0.18)

Revenue Estimate

$6.45 billion

Change From Year-Ago Revenue

(9.8%)

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Does Rite Aid have the right prescription for its business?
Analysts have had mixed views on Rite Aid's prospects over the past few months. They've cut their initial break-even estimates for the company's most recent quarter to a loss of $0.02 per share, but they've also boosted fiscal 2014 earnings estimates to a profit of $0.03 per share. The stock has focused on the longer-term view, as Rite Aid's share price has jumped more than 30% since the beginning of the year.

For a while last year, it looked as if Rite Aid might finally be turning the corner after a long period of weakness. A dispute between rival Walgreen (NYSE: WAG  ) and pharmacy benefit manager Express Scripts (NASDAQ: ESRX  ) led to an exodus of customers away from Walgreen, and Rite Aid appeared to capture its share of those seeking to have their prescriptions filled elsewhere.

Since then, though, Rite Aid has sunk back into old bad habits. In March, it announced a 2% drop in same-store sales, with a drop in pharmacy sales of 4.5% more than offsetting a nearly 4% increase in revenue from the front-end of its stores. Yet even that front-end strength came largely from Easter's coming in March rather than April this year, suggesting that the retailer's results were even weaker than reported. Meanwhile, Walgreen has seen same-store sales grow as its new loyalty program attempts to win back customers from Rite Aid and CVS Caremark (NYSE: CVS  ) .

Rite Aid has fought back, though, seeking to match up to Walgreen and CVS by remodeling its stores. But because it is already debt-ridden, Rite Aid can't afford to do store remodeling at a very fast pace, with Fool contributor Adam Levine-Weinberg arguing that it could take a decade for the company to finish all of its renovations.

In Rite Aid's quarterly report, watch for commentary about the new services that it and other pharmacies may be offering to customers. If Rite Aid can bring brand-new customers to provide both acute-care and chronic-care services, it could finally bring the turnaround that investors have looked for in recent years.

Regardless of which drugstore customers prefer, pharmacy benefit managers seek to provide innovative solutions for skyrocketing health care costs is as clear as ever. Express Scripts is part of that solution, and in this brand new premium report on the company, we clearly lay out the opportunity in front of this misunderstood stock. Claim your copy by clicking here now.

Click here to add Rite Aid to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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  • Report this Comment On April 10, 2013, at 10:03 AM, masterwallstreet wrote:

    In my opinion only I like your article about Rite Aid. This article seems to be the most positive article recently. We have less than 24 hours before earnings come out. Last earnings they posted a profit and the stock ent up 40%. If they posted another profit this quarter, and all of the heavy shorting and all of the heavy buying of calls, and based on the conference call about all of the improvements and the newly designed website. .What is your opinion? How high can this go? Can it double or triple?

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