Rite Aid Earnings Boosted by Tax Break, but Solid Turnaround Continues

Rite Aid released its fiscal fourth-quarter financial results Wednesday before the markets opened. The company had $0.12 in earnings per share (EPS) on $6.8 billion in revenue. That compared to Thomson Reuters consensus estimates of $0.07 in EPS on $6.80 billion in revenue. In the same quarter of the previous year, Rite Aid posted $0.06 in EPS and $6.60 billion in revenue.

The company expects sales to be between $26.9 billion and $27.4 billion in fiscal 2016, with same-store sales growth expected to range from 2.5% to 4.5% over fiscal 2015. At the same time, Rite Aid expects $0.19 to $0.27 in EPS for the fiscal year. The consensus estimates are $0.43 in EPS and revenue of $27.19 billion.

Same-store sales for the quarter increased 4.5% over the prior year, consisting of a 5.7% increase in pharmacy sales and a 2.0% increase in front-end sales.

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Net income for Rite Aid rose to $1.79 per share in the fiscal fourth quarter, largely due to an income tax benefit of $1.67 per share. In terms of broader numbers, the company had net income of $1.84 billion and a tax benefit for the quarter of $1.72 billion.

John Standley, chairman and CEO of Rite Aid, said:

In the fourth quarter, our strong growth in same-store sales and prescription count as well as strong cost control helped drive continued profitability.

These positive results contributed to a successful year in which we took significant steps to further position Rite Aid as a retail healthcare company.

Ahead of earnings, a few analysts gave their calls for Rite Aid on April 6:

• Cowen maintained an Outperform rating and set its price target at $12.
• Jeffries maintained a Hold rating with a price target at $8.25.
• Deutsche Bank upgraded Rite Aid to a Buy rating with a $9 price target.
• J.P. Morgan initiated coverage with an Overweight rating and a $10 price target.

Shares of Rite Aid closed Tuesday down 1.7% at $8.69. Following the release of the earnings report, shares were up 1.5% at $8.82 in premarket trading Wednesday. The stock has a consensus analyst price target of $9.69 and a 52-week trading range of $4.42 to $9.07.

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