5 Things Rite Aid Corporation's Management Wants You to Know

By Markets Fool.com

Shareholders of Rite Aid Corporation weren't feeling too great after the company's second-quarter results. Shares dropped more than 18% on the day of the pharmacy retailer's earnings release because of gloominess about the rest of the year. But a lot has changed in just three months.

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Rite Aid reported stellar third-quarter results on Thursday. The stock surged nearly 12% on the good news. And the company's management team was clearly in good spirits during the quarterly conference call. Here are five things they want Rite Aid investors to know (quotes courtesy of our friends at Thomson Reuters).

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1. Business is booming
Where do we start with the good news? Revenue was up 5.3% year over year to $6.7 billion. Earnings jumped to$104.8 million, or $0.10 per diluted share, from$71.5 million, or $0.04 per diluted share, in the same quarter last year.

CEO John Standley listed Medicaid expansion as the first item in explaining the success experienced during the quarter. He noted that "it will be interesting to see what year two looks like" for states that expanded Medicaid. Standley thinks that there's a good chance of sustained growth that will benefit Rite Aid.

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2. Flu season is here -- and RiteAid is here to help and be helped
While Americans might dread flu season, it's a good time of the year for Rite Aid. The pharmacy chain benefited from the more than 3 million flu shots given so far in 2015. While some of those were given at the start of the year, Rite Aid saw an increase in flu shots during the third quarter.

Ken Martindale, Rite Aid's President and COO, said that one reason behind the higher numbers of flu shots is the company's wellness ambassadors. These associates roam the stores, helping customers find products and promoting Rite Aid's wellness offerings -- including flu shots.

3. Expanding healthcare offerings
Rite Aid's management team had plenty more to say about the company's health and wellness initiatives. John Standley emphasized that "akey part of our strategy is to expand our healthcare offering to provide a higher level of care to the communities we serve."

One major initiative that Standley talked up was Rite Aid's "Quit for You" smoking cessation program. "Quit for You" is a personalized approach to quitting smoking where the company's pharmacists work one-on-one with customers. Ken Martindale stated that Rite Aid is expanding the program for the New Year to include "personalized text message support for quit tips and positive affirmations" for smokers looking to kick the habit.

Source: HealthSpot

Another effort getting considerable attention is the launch of HealthSpot telemedicine kiosks in selected stores. These walk-in stations allow Rite Aid customers to talk with health professionals via two-way video. Expect to hear a lot more about these stations from the pharmacy retailer in the future.

4. McKessondeal is working
Last quarter, John Standley attributed Rite Aid's reduced full-year earnings guidance in part to a slow start for the company's new distribution and purchasing deal with McKesson. He sang a different tune during the earnings call on Thursday, though.

Standley said that the McKesson purchasing arrangement "yielded savings during the quarter" that helped drive higher pharmacy gross profit. He also noted that the distribution deal with McKesson delivered working capital benefits and improved in-stock positions, as the company expected. Overall, Standley said, Rite Aid saw "good improvement and strength" from its relationship with McKesson.

5. Positive about the future
The somewhat gloomy outlook from a few months ago was replaced by optimism. Rite Aid raised its full-year earnings guidance to a range of$0.31 to $0.37 per share from $0.22 to $0.33 per share.

Obviously, the great third-quarter results affected this outlook considerably. Rite Aid CFO Darren Karst added that other factors contributed to the increased guidance, including continued benefits from the McKesson deal, the company's wellness remodeling program, and its customer loyalty program.

One potential dark cloud remains on the horizon, though. Both Karst and Standley commented on the continued reimbursement rate pressure. However, while Standley admitted that this will continue to present a challenge, he insisted that Rite Aid's management is"working hard as a team to meet this challenge head on."

Peering into the crystal ball
After the second-quarter disappointment, my view was that Rite Aid's problems were only temporary. That view now appears to be confirmed.

Looking ahead into 2015, I think that Rite Aid's management team -- and shareholders -- have reason to be positive. The five points mentioned above underscore why. It's possible that an overall market downturn would drag Rite Aid shares down with it, but barring that negative scenario, I suspect that this stock should continue its winning ways into next year.

The article 5 Things Rite Aid Corporation's Management Wants You to Know originally appeared on Fool.com.

Keith Speights has no position in any stocks mentioned. The Motley Fool recommends McKesson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.