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Why Rite Aid Stock Is Sinking Today

By Keith Speights – Sep 23, 2021 at 11:27AM

Key Points

  • Rite Aid missed Wall Street revenue estimates in the second quarter.
  • The company's bottom line deteriorated from the year-ago period but topped analysts' expectations.
  • Rite Aid looks for increased demand for COVID-19 vaccines and testing through the rest of the year.

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Investors reacted negatively to the company's Q2 update.

What happened

Shares of Rite Aid (RAD 0.59%) were sinking 8% as of 11:06 a.m. EDT on Thursday. The decline came after the pharmacy chain announced its second-quarter earnings results before the market opened.

So what

Revenue from continuing operations in the second quarter was $6.11 billion, up 2.2% year over year. This fell short of the Wall Street consensus estimate of $6.21 billion.

The company announced an adjusted net loss from continuing operations in the second quarter of $22 million, or $0.41 per share. This reflected significant deterioration from Rite Aid's adjusted net income of $13.5 million, or $0.25 per share, in the prior-year period. However, the adjusted net loss came in better than the average analysts' estimate of a net loss of $0.48 per share.

A pharmacist wearing a face mask.

Image source: Getty Images.

Investors shouldn't place too much focus on a single quarter. Rite Aid's second-quarter results provide only a snapshot of how the company is doing. In this case, though, those results reflect both the progress it is making and the challenges that it continues to face.

Rite Aid's retail pharmacy business continues to perform relatively well. Sales increased 6.5% year over year to $4.28 billion. But the company's pharmacy services segment is struggling. Revenue fell 6.9% to $1.9 billion with declining membership in the pharmacy benefits management business and Elixir insurance.

Now what

Rite Aid thinks that it could receive a boost from increased demand for COVID vaccines and testing through the end of the year. The company increased its full-year guidance for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to a range of $460 million to $500 million. 

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Rite Aid Stock Quote
Rite Aid
$5.10 (0.59%) $0.03

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