Shares of Rite Aid (NYSE:RAD), a drugstore chain offering products for consumers' health and wellness, jumped as much as 23% higher Thursday morning after the company delivered a second-quarter earnings-per-share beat. Here's what investors need to know.
Rite Aid shares jumped this morning despite mixed top- and bottom-line results. More specifically, revenue fell 1% during the second quarter to $5.37 billion, just shy of analysts' estimates calling for $5.41 billion. While revenue was down, due in part to a lower store count, it was partially offset by a 2.7% increase in same-store prescription volume.
On the bottom line, adjusted earnings per share checked in at $0.12, well above analysts' estimates calling for $0.02 per share. Management also updated full-year guidance, narrowing its adjusted earnings-per-share range of breakeven to $0.56 per share, from the prior $0.14 per share loss to $0.72 earnings per share.
"Our Adjusted EBITDA results exceeded our plan driven by prescription count growth and strong expense control. This gives us important momentum for our future, and I look forward to working closely with our team to deliver a solid finish to our fiscal year and position Rite Aid as an innovative leader in our industry," said Rite Aid CEO Heyward Donigan in a press release.
Investors continue to find themselves in a difficult spot when it comes to Rite Aid as a long-term investment. On one hand, as the American population continues to age and demand for healthcare and prescription products grows, a substantial opportunity for drug retailers and other healthcare businesses grows too. On the other hand, Rite Aid has shed many stores and finds itself less able, both in operation scale and financially, compared to other large competitors, to capitalize on such an opportunity.
Recently appointed CEO Donigan must continue to foster increasing same-store prescription volume and cost cuts, but what investors need to watch for will be the company's new strategic plan that aims to better realize the company's overall potential -- a plan management hopes to share within a few months. That strategic plan will be crucial to convincing investors Rite Aid has potential as a long-term investment. For today, a better-than-expected adjusted earnings-per-share figure and improving same-store prescription volume were enough to boost the stock, although it remains 62% lower over the past year.