Rite Aid Corp. (NYSE: RAD) is showing that the turnaround continues. On top of acquiring RediClinic on Thursday, the retail pharmacy operator announced earnings of $0.06 per share on revenues of roughly $6.6 billion. Thomson Reuters had consensus estimates of $0.04 in earnings per share and revenues of $6.54 billion.
While the $0.06 is ahead of estimates, we did see that the company’s earnings would have been $0.10 per share outside of items, versus last year’s adjusted $0.07 per share.
Same-store sales for the most recent quarter were up 2.1% over the prior year. These results consisted of a 3.5% increase in pharmacy sales, partially offset by a 0.7% decrease in front end sales.
Rite Aid also offered its 2015 outlook, which considers planned wage and benefit increases and many other initiatives — and a challenging reimbursement rate environment. Revenue is expected to be between $26 billion and $26.5 billion in fiscal 2015, with same-store sales expected to range from an increase of 2.5% to 4.5% over fiscal 2014. Thomson Reuters has the coming year’s revenue estimate at $25.75 billion.
Adjusted EBITDA is expected to be between $1.325 billion and $1.4 billion for the year, while income per diluted share is expected to be $0.31 to $0.42 for the year, generating a mid-point of $0.365 per share. Thomson Reuters has the consensus estimate as $0.35 per share.
Closing at $6.40 generates a forward P/E ratio of 17.5 at the mid-point. This is not exactly considered expensive for a continued turnaround, and the market cap of $6.2 billion still generates a cheap valuation of less than 0.25 times expected sales.
For a comparison, Walgreen Co. (NYSE: WAG) trades at 0.8 times expected sales and more than 17 times a blended calendar earnings (August year-end). CVS Caremark Corp. (NYSE: CVS) trades at 0.65 times expected sales and almost 17 times expected earnings. Rite Aid has normalized its expected earnings multiple, and it remains cheap against a revenue comparison to Walgreen and CVS Caremark.
The only thing holding Rite Aid back at this point is its leveraged balance sheet. That being said, Rite Aid continues to please. It also continues to confuse its doubters and short sellers.
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