Rite Aid posts surprise third-quarter earnings

Ritual Aid (RAD 1.07% ) did its shareholders Thursday by delivering a much better than expected third quarter of fiscal 2021.

The major drugstore operator released results for the quarter this morning, and they showed a 12% year-over-year increase in revenue to $6.1 billion. More encouragingly, against expectations, Rite Aid landed in the black on net income, even as its adjusted net income fell 26% to $21.6 million, or $0.40 per share.

Image source: Rite Aid.

On average, analysts tracking the stock had estimated the company would post revenue of $5.8 billion and an adjusted net loss of $0.05 per share.

A big reason for Rite Aid’s positive surprise was the cornavirus pandemic. While health concerns are at the forefront of many customers’ minds, pharmacy sales increased by more than 6%. By comparison, initial (i.e. non-pharmaceutical) sales increased only 0.3%. Meanwhile, the company’s pharmacy benefits manager, Elixir, saw its take rise 29% to $2.1 billion for the quarter.

Buoyed by these results, Rite Aid has raised its full-year 2021 guidance slightly. The company now estimates total revenue to be between $23.9 billion and $24.2 billion, which, at the low end, would mean nearly a 9% year-over-year improvement (previous forecast: $23.5 billion to $24 billion). Adjusted net earnings per share are expected to be $0.45 to $0.85 and free cash flow is estimated between $50 million and $100 million.

With a massive rollout of coronavirus vaccines in the cards, Rite Aid has good momentum in 2021. Investors rewarded it by driving the stock up more than 17% on Thursday, crushing the modest gain of the S&P500 index of the day.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

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