Rite Aid (RAD) shares jumped almost 20% on June 23 after the American drugstore chain delivered better-than-expected first-quarter results and also raised its FY2023 revenue guidance well above analysts’ expectations.
Q1 Beat
The company reported an adjusted loss of $0.60 per share, which was much better than the street’s estimated loss of $0.70. Though the loss narrowed compared to the estimates, it was much worse than the earnings per share of $0.38 in the same quarter last year.
Revenues declined 2.4% year-over-year to $6.01 billion but still exceeded consensus estimates of $5.75 billion.
Raised FY2022 Revenue Guidance
Based on strong Q1 results and improved utilization of higher-cost drugs at Elixir, the company raised its revenue guidance for fiscal 2023.
Revenues are now forecast to be in the range of $23.6 to $24 billion, higher than the previous guidance range of $23.1 to $23.5 billion as well as the consensus estimate of $22.91 billion.
However, the company now forecasts a larger adjusted loss in the range of $1.19 per share to $0.66 per share, higher than the prior guided range of $0.53 to $1.06 and far superior to the consensus estimate that is pegged at a loss of $3.03 per share.
CEO’s Comments
Rite Aid CEO, Heyward Donigan, commented, “We continue to make strides on our journey to transform Rite Aid and define the modern pharmacy. In the first quarter we increased our non-COVID prescriptions, reduced SG&A, built momentum at Elixir, and delivered solid results across the business. The entire Rite Aid team looks forward to advancing our pharmacists’ role in improving health outcomes.”
Wall Street’s Take
Consensus among analysts is a Strong Sell based on three Sells. The average Rite Aid analyst price target of $5.33 implies 33.79% downside potential to current levels.
Increased Hedge Fund Trading
On the contrary, TipRanks’ Hedge Fund Trading Activity tool shows that confidence in RAD is currently Very Positive, as some of the top hedge funds that were active in the last quarter increased their cumulative holdings by 564,500 shares.
Conclusion
Shares of Rite Aid have more than doubled over the past 30 days, massively outpacing the benchmark indices and implying strong investor confidence.
Raised revenues guidance and management’s confidence to project positive free cash flow in Fiscal 2023, despite the expected losses, bodes well for the stock in the months to come.
