Categories Analysis, Health Care, Retail

Wall St expecting a turn-around quarter from Rite Aid in Q2

Things haven’t been working out so well for Rite Aid (NYSE: RAD) since the past three years. The company’s inability to stop its stock from free fall culminated in CEO John Standley stepping down from the top post last month.

The newly appointed CEO Heyward Donigan has vast experience in the healthcare industry and is on Fortune’s watch list of executives who have the potential to become the world’s most powerful women.

Following failed merger bids with Walgreens (NASDAQ: WBA) and more recently Albertsons, the company is now looking up at the new CEO to save the sinking ship. The stock has slightly recovered since the appointment of Donigan.

During the most recently reported quarterly results, the drug retailer missed both the revenue and earnings estimates. Revenues growth was flat year-over-year, primarily due to prescription reimbursement rate pressure in the Retail Pharmacy segment as well as margin compression in the Pharmacy Services segment.

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The reimbursement rate pressure is likely to dent results in the second quarter also, but it could be offset by a number of other factors. In order to drive operational efficiency, the management has been remodeling its retail pharmacies as well as wellness stores. Front-end channels, which have been suffering from weakness in over-the-counter products, are also being leveraged, despite the effect of these investments on EBITDA.

Rite Aid (RAD) Q1 2020 earnings results

Sale of CBD-based products is also expected to boost overall performance during the second quarter.

Analysts expect Rite Aid to report earnings of 7 cents per share during the second quarter of 2020, compared to a loss of 20 cents per share it reported during the same quarter last year, boosted by its cost-saving measures.

Revenues are once again projected to be flat at $5.41 billion.

RAD stock has declined 70% in the last one year, and 52% in the year-to-date period. The stock has a Moderate Sell rating in the market.

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