Why Is Rite Aid (RAD) Down 7% Since Last Earnings Report?
A month has gone by since the last earnings report for Rite Aid (RAD). Shares have lost about 7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Rite Aid due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Rite Aid Q3 Loss Narrower Than Expected, Revenues Beat
Rite Aid posted third-quarter fiscal 2023 results, wherein the bottom and top lines beat the Zacks Consensus Estimate. However, both metrics declined year over year. Results were hurt by the drab demand for flu immunizations and COVID-19 vaccines.
Q3 Highlights
Rite Aid incurred an adjusted loss of 14 cents per share, narrower than the Zacks Consensus Estimate of a loss of 32 cents. However, the figure came below the prior-year quarter’s earnings of 15 cents.
Revenues declined 2.3% from the year-ago quarter’s figure to $6,083.3 million but surpassed the Zacks Consensus Estimate of $5,937 million. Sluggishness in both Retail Pharmacy and Pharmacy Services segments hurt sales.
In the fiscal third quarter, the Retail Pharmacy segment's revenues fell 0.5% due to a reduction in COVID-19 vaccines and testing, and store closures, offset by higher acute and maintenance prescriptions. Retail Pharmacy same-store sales were up 7.5%, driven by a 9.5% rise in pharmacy sales and 2.2% growth in front-end same-store sales. Excluding cigarettes and tobacco products, front-end same-store sales moved up 2.7% from the year-ago period’s reading.
Prescription count at the same-store sales, adjusted to 30-day equivalent, rose 4.4% on the back of non-COVID-19 prescriptions (up 3.6%), acute prescriptions (up 8%) and maintenance prescriptions (up 2.1%). Prescription sales constituted 72% of the overall drugstore sales. The total store count at the end of the reported quarter was 2,324.
In the Pharmacy Services segment, revenues declined 7.1% due to client loss announced earlier and reduced Elixir Insurance membership.
In the reported quarter, adjusted EBITDA plunged 21.2% from the year-ago period’s level to $121.9 million. The adjusted EBITDA margin contracted 50 basis points to 2% in the quarter under review. SG&A expenses decreased 6.5% from the year-ago period’s reading to $1,194.5 million.
Financial Status
Rite Aid ended the reported quarter with cash and cash equivalents of $103 million, long-term debt (net of current maturities) of $3,189 million, and a total shareholders' equity deficit of $403.7 million.
FY23 Outlook
The company revised its fiscal 2023 expectations. Rite Aid’s revenues are anticipated to be $23.7-$24 million compared with the earlier mentioned $23.6-$24 million. The Retail Pharmacy segment’s revenues are likely to be $17.4-$17.6 billion compared with the prior stated $17.35-$17.65. The Pharmacy Services segment’s revenues are expected to be $6.3-$6.4 billion, which compares favorably with previously communicated $6.25-$6.35 billion.
Net loss is likely to be between $551 million and $584 million, wider than earlier stated $477.3-$520.3 million. Adjusted EBITDA is anticipated to be $410-$440 million compared with the earlier stated $450-$490 million, induced by the expectations of cautious consumer demand and supply-chain headwinds. The Retail Pharmacy segment’s Adjusted EBITDA is predicted to be between $265 million and $285 million, down from the prior stated $305-$335 million. The Pharmacy Services segment’s adjusted EBITDA is projected to be $145-$155 million.
Adjusted net loss per share is envisioned between $2.18 and $1.78 compared with a loss of $1.52 to 97 cents stated earlier.
For fiscal 2023, capital expenditure is forecast to be $225 million, which is to be utilized for investments in digital capabilities, technology, prescription file purchases and distribution center automation. Rite Aid expects to generate a positive free cash flow in fiscal 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -275.61% due to these changes.
VGM Scores
At this time, Rite Aid has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Rite Aid has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Rite Aid Corporation (RAD) : Free Stock Analysis Report
