Credit Suisse, Deutsche Bank Weigh In On Rite Aid

Rite Aid Corporation RAD beat Q3 expectations Wednesday and the stock soared 11.88 percent Thursday to $6.78.

Credit Suisse and Deutsche Bank commented on the stock after the earnings release. Below are highlights along with current ratings and price targets.

Credit Suisse - Outperform, $8 price target

“Rite Aid's Q3 beat and raise provides solid evidence that the company's visibility on its outlook is improving and its turnaround is once again moving in the right direction. Q3 EBITDA of $332.8 million beat consensus by $40 million and the $1.29 billion mid-point of new fiscal '15 guidance exceeded consensus by over $50 million.

“While a fair amount of the upside was due to the fact that Q2's $40 million inventory valuation benefit will no longer reverse in the back half, management’s improved tone and the fact that the company raised underlying guidance suggest an inflection point in momentum given recent disappointments.”

Deutsche Bank - Buy, $7 price target

“F3Q EPS of $0.10 was ahead of our forecast for $0.07 and the Street at $0.05. Results included a 2c debt retirement charge. F2015 EPS guidance was raised to $0.31-$0.37 from the previous guidance of $0.22-$0.33 and compares to consensus of $0.30, incorporating the 5c F3Q beat and 1.5c of F4Q raise at the midpoint. Rite Aid is benefiting from the McKesson sourcing agreement at the gross margin line and SG&A expense controls.

“We are adjusting our estimates to reflect the stronger than expected F3Q results and management guidance for F2015. Our revised F2015 EPS estimate is $0.36 and our revised F2015 revenue estimate is $26.5B.

“We believe the revenue guidance is conservative as our forecast is above the top of the guidance range and includes 1 percent front end sales growth and 4.5 percent prescription sales growth, slower than recent prescription sales growth. We believe revenue outperformance could drive EPS above our forecast and above the guidance range for F2015.”