Tag Archives: NYSE:RAD

Rite Aid: Zacks’ Bull of the Day Play

Estimates have risen sharply for Rite Aid Corporation (RADAnalyst Report) following the company’s better-than-expected fiscal 2015 third quarter results. Not only did Rite Aid crush earnings expectations, it beat revenue expectations thanks to a solid 5.4% jump in same-store sales. And management increased its full year sales and EPS guidance too.

 

Rite Aid is a Zacks Rank #1 (Strong Buy) stock.

Rite Aid Corporation is a drugstore chain with 4,570 stores. Approximately 70% of its total revenues comes from pharmacy sales. It is headquartered in Camp Hill, Pennsylvania and has a market cap of $7.2 billion.

Third Quarter Results

Rite Aid reported its fiscal 2015 third quarter results on December 18. Results came in well above expectations.

Earnings per share for Q3 was $0.10, doubling the Zacks Consensus Estimate of $0.05. It was also 150% increase from the same quarter last year. Revenues rose 5% to $6.692 billion, ahead of the consensus of $6.643 billion. Same-store sales increased a solid 5.4% year-over-year, driven by a 7.2% increase in pharmacy sales.

The gross profit margin expanded 42 basis points to 28.74% of revenues. Meanwhile, selling, general and administrative expenses declined 38 basis points to 25.29% of revenues. And total interest expense decreased more than 5% year-over-year. These factors helped drive a 44 basis point improvement in the net profit margin to 1.57% of revenues.

Estimates Rising

Following strong Q3 results, management raised its full year guidance for both same-store sales and EPS. The company now expects fiscal 2015 same-store sales within a range of 3.75-4.25%, up from prior guidance of 3.00-4.00%, and EPS of $0.31-$0.37, up from $0.22-$0.33.

This was also well above consensus at the time and prompted analysts to unanimously revise their estimates higher too, sending the stock to a Zacks Rank of 1 (Strong Buy).

 

The 2015 Zacks Consensus Estimate is now $0.34, within guidance, and up from $0.28 before the report. The 2016 consensus increased from $0.37 to $0.43 over the same period.

Rite Aid also reported solid top-line results for December on January 2. Same-store sales increased 5.3% year-over-year, driven once again by strong growth in pharmacy sales, which rose 7.3%.

Valuation

Shares of Rite Aid have soared since the better-than-expected Q3 report. But valuation still looks reasonable with shares trading at 18x forward 12-month EPS, which is a slight discount to the industry median. Its enterprise value to cash flow ratio of 17x is also a slight discount to its peers.

The Bottom Line

With strong earnings momentum driven by solid top-line growth and expanding profit margins, along with reasonable valuation, shares of Rite Aid could very well continue to climb over the next several weeks.

Todd Bunton, CFA is a Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor and Surprise Trader services.

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Rite Aid: Zacks’ Bull of the Day Play

Rite Aid’s shares surged after the company reported excellent results and raised its guidance. As the turnaround appears to be back on track on now, shares are likely to continue to move higher.

Headquartered in Camp Hill, Pennsylvania, Rite Aid Corporation (RAD) is the third largest retail drugstore in the U.S., based on revenues. The company has about 4,600 stores across the country.

Excellent Results and Raised Guidance

Rite Aid reported its third quarter fiscal 2015 results on December 18. Revenues for the quarter increased 5.3% to $6.7 billion thanks mainly to 5.4% increase in same store sales from the previous year quarter.

Net income came in at $104.8 million or $0.10 per share, up from $71.5 million or $0.04 per share, a year ago and much ahead of the Zacks Consensus Estimate of $0.05 per share.

Based on third quarter results, the management raised their guidance for fiscal 2015. They now expect net income to be between $315 million and $370 million or between $0.31 and $0.37 per share. The management expects script growth to benefit from the Affordable Care Act, favorable demographics filed by acquisitions and growth in immunizations.

This guidance was significantly better than the previous guidance of $0.22 – $0.33 per share and the Zacks Consensus Estimate of $0.30 per share.

The partnership with McKesson for drug distribution and purchasing process now appears to be paying dividends as all stores were converted to this new distribution process by early in the third quarter.

Estimates Revisions

As a result of a strong quarterly report and updated guidance, analysts have started raising their estimates for RAD. Zacks Consensus Estimate for the current fiscal year now stands at $0.33 per share up from $0.28 per share, 7 days ago. The consensus estimate for the next fiscal year is currently unchanged at $0.37 per share but is likely to move higher as more analysts update their research reports and estimates.

 

The following “Price and Consensus” chart showing the positive earnings momentum for the company.

RAD has beaten estimates in three out of last four quarters (one meet), with an average quarterly surprise of 92%.

Growth Drivers

Ageing US Population: US population has been ageing fast and Rite Aid is well positioned to benefit from this trend.

Affordable Care Act: With Affordable Care Act, total coverage is expected to expand to 25 million in 2016 from 12 million in 2014. This will expand the top-line for the company.

Turnaround: Several initiatives taken by the company to reinvigorate top-line growth and reduce costs are delivering results.

The Bottom Line

With its strong national footprint and recent strategic initiatives like expanding the health care offering, growing Wellness+ and investing in its stores, the company should be able to expand its customer base and continue its strong performance in the coming quarters. Further ageing US population and Affordable Care Act will further support the stock.

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Rite Aid: Zacks’ Bull of the Day Play

Rite Aid Corporation (RAD), headquartered in Camp Hill, Pennsylvania, is the third largest retail drugstore in the U.S., based on revenues. The company has about 4,600 stores and 30 walk-in clinics in 31 states across the country and in the District of Columbia.


Strong Same-Store Sales for April

Rite Aid recently reported that the same store sales for April increased 5.0% over the prior-year period, thanks partly due to a shift in the timing for Eater. Same store sales for the eight-week period ended April 26, 2014 (fiscal year-to-date) increased 2.9% over the prior-year period. This was better than street estimates.

Excellent Results and Raised Guidance

Rite Aid reported its Q4 earnings on April 10, 2014. Revenues for the quarter came in at $6.6 billion; up from $6.5 billion in the same quarter of prior year, thanks mainly to a 3.5% increase in pharmacy same store sales.

Adjusted net income for the quarter was $44.1 million or $0.10 per share handily beating the Zacks Consensus Estimate of $0.04 per share.

The company recently acquired Health Dialog—a provider of in-store care coaches and RediClinic—a leading operator of retail clinics. These will further support RAD’s growth initiatives. The management however does not expect a material impact from the acquisitions on the current fiscal result.

RAD also continues to expand its partnership with drug wholesaler MsKesson and expects a working capital benefit of $150 million as a result of the agreement, to be fully realized in the latter half of the year.

Rite Aid completed its 1,200th wellness store remodel during the quarter as they continue to see positive results for these stores compared to the rest of the chain.

Following solid quarterly performance, Rite Aid management now expects sales for fiscal 2015 to be between $26.0 billion and $26.5 billion, with same store sales growth in the range of 2.5% to 4.5%.

Estimates Revisions

As a result of a strong quarterly report and updated guidance, analysts have raised their estimates for RAD. Zacks Consensus Estimate for the current fiscal year now stands at $0.36 per share up from $0.32 per share, 60 days ago. The consensus estimate for the next fiscal year is also up to $0.48 per share from $0.43 per share earlier. 
RAD beat estimates in all the quarters last year, with an average quarterly surprise of 225%. Rising estimates sent RAD back to a Zacks Rank#1 (Strong Buy). 
Growth Drivers

Ageing US Population: US population has been ageing fast and RAD is well positoned to benefit from this trend.

Affordable Care Act: With Affordable Care Act, total coverage is expected to expand to 25 million in 2016 from 12 million in 2014. This will expand the top-line for RAD.

Turnaround: Several initiatives taken by the company to reinvigorate top-line growth and reduce costs are delivering results. EBIDTA reached $1325 million in 2014 after bottoming out at $829 million in 2011.

The Bottom Line

RAD was earlier featured as the “Bull of the Day” on 10/24/13 and 4/24/14 and it has continued to climb during this period. We decided to take another look at the stock ahead of its Q1 earnings expected later this month and believe that it still has the potential to continue its run.

With its strong national footprint and recent strategic initiatives like expanding the health care offering, growing Wellness+ and investing in its stores, the company should be able to expand its customer base and continue its strong performance in the coming quarters. Further ageing US population and Affordable Care Act will further support the stock.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 DaysClick to get this free report >> 

Rite Aid: Zacks’ Bull of the Day Play

Rite Aid reported excellent quarterly results supported by strong pharmacy sales growth and expanding margins. Earnings estimates have thus surged, sending this drugstore chain to Zacks rank #1 (Strong Buy).

About the Company

Rite Aid Corporation (RAD), headquartered in Camp Hill, Pennsylvania, is the third largest retail drugstore in the U.S., based on revenues. The company has 4,592 stores currently in 31 states across the country and in the District of Columbia.

Excellent Quarterly Results

Rite Aid reported its Q4 earnings on April 10, 2014. Revenues for the quarter came in at $6.6 billion; up from $6.5 billion in the same quarter of prior fiscal year, thanks mainly to a 3.5% increase in pharmacy same store sales.

Adjusted net income for the quarter was $44.1 million or $0.10 per share, handily beating the Zacks Consensus Estimate of $0.04 per share.

The company recently acquired Health Dialog—a provider of in-store care coaches and RediClinic—a leading operator of retail clinics. These will further support RAD’s growth initiatives. The management however does not expect a material impact from the acquisitions on the current fiscal result.

RAD also continues to expand its partnership with drug wholesaler MsKesson and expects a working capital benefit of $150 million as a result of the agreement, to be fully realized in the latter half of the year.

Rite Aid completed its 1,200th wellness store remodel during the quarter as they continue to see positive results for these stores compared to the rest of the chain.

Management Raises Guidance

Following solid quarterly performance, Rite Aid management now expects sales for fiscal 2015 to be between $26.0 billion and $26.5 billion, with same store sales growth in the range of 2.5% to 4.5%.

Adjusted EBITDA for fiscal 2015 is expected to be in the range of $1.325–$1.4 billion and net income is expected to be between $313.0 million and $423.0 million or of $0.31 per share to $0.42 per share.

Per management “improved guidance is based upon the anticipated benefits of our wellness remodel program, customer loyalty program, and other initiatives to grow sales and drive operational efficiencies”.

Estimates Revisions

As a result of a strong quarterly report and updated guidance, analysts have raised their estimates for RAD. Zacks Consensus Estimate for the current fiscal year now stands at $0.36 per share up from $0.32 per share, 30 days ago. The consensus estimate for the next fiscal year is also up to $0.48 per share from $0.43 per share earlier.

RAD beat estimates in all the quarters last year, with an average quarterly surprise of 225%. Rising estimates sent RAD back to a Zacks Rank#1 (Strong Buy) earlier this month.

The following chart shows RAD’s excellent record of beating or meeting estimates in the last few quarters:

The Bottom Line

With its strong national footprint and recent strategic initiatives like expanding the health care offering, growing Wellness+ and investing in its stores, the company should be able to expand its customer base and continue its strong performance in the coming quarters. Ageing US population and Affordable Care Act will further support the stock.

RAD is a Zacks Rank#1 (Strong Buy) stock. It also has a Zacks recommendation of “Outperform”. Further the industry rank of 69 out of 265 (top 26%) indicated a likelihood of outperformance in the short- to medium- term.

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