RAD Stock Surges as Q2 Earnings Beat Analyst Expectations

RAD Stock

RAD stock is up over 7.5% today after Rite Aid Corporation (NYSE:RAD) posted better-than-expected second-quarter earnings.

For the second fiscal quarter, the US drug store chain reported a net loss of $78.7 million USD, which represents $1.48 per share. Adjusted net income was $6.3 million USD, or $0.12 per share, while adjusted EBITDA was $134.2 million USD. Analysts expected net income of $0.07 per share and today’s results have led the company to reiterate its guidance of $21.5 billion USD to $21.9 billion USD revenue for the full fiscal 2020. The company also increased its projected net loss by about $60 million USD; however, RAD stock is still climbing.

In what was her first earnings call since replacing John Standley, new CEO Heyward Donigan said the company faces many challenges, such as the “same reimbursement pressures” other healthcare companies face, but that she was confident the company was up to the challenge. “After my first few weeks as CEO, I’m optimistic about our future because I believe in the Rite Aid brand and the opportunity we have to deliver innovative experiences as a health and wellness destination, even as we recognize the challenges ahead.” RAD shares are currently valued at $8.31.

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Standley was ousted as CEO back in March following a nine-year stint in which he oversaw two failed mergers that led to RAD stock tanking as much as 95% since the beginning of 2017. A merger with Walgreens (NASDAQ:WBA), initially announced in 2015, was thwarted by the Federal Trade Commission as it would have left US consumers with a choice of just two major pharmacy chains. Instead, Walgreens agreed to buy 2,186 Rite Aid stores for over $5 billion USD, essentially halving the company.

A second attempt at a merger for Rite Aid was announced in January 2018, this time with grocery chain Albertsons, which was worth a reported $24 billion USD. However, that deal faced intense pushback from investors as it was seen as a vehicle for Albertsons’ private equity owner, Cerberus Capital Management, to take the company public without giving any reward to Rite Aid investors. The deal was mutually terminated in August and led to a 10% decline in RAD stock.

Despite RAD stock trading a long way off its lofty peaks of over $180 before the failed mergers, today’s news is a good start to life for Donigan as Rite Aid looks to finally be turning over a new leaf.

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