It has been a tough couple of months for Rite Aid Corporation (NYSE:RAD) stock. Rite Aid stock traded near $9 as recently as mid-January. Investors then were betting that a Donald Trump Administration Federal Trade Commission would approve the company’s acquisition by Walgreens Boots Alliance Inc (NASDAQ:WBA). With WBA offering an even $9 per share for RAD stock, RAD’s $8.75 highs implied overwhelmingly positive odds of an approval.

A little over three months later, the situation looks very different. Walgreens cut its offer to $6.50-$7 per share of Rite Aid stock from the original $9. Since then, RAD stock has declined 57%, and trades below $4.

Clearly, investors are far less confident in the merger’s approval. That, in turn, has increased the focus on Rite Aid earnings and sales — a problem itself after a tough few quarters for the company.

Same-store sales declined 1.8% through the first three quarters of RAD’s fiscal 2017 (ending February), including a 3.4% drop in Q3. Adjusted EBITDA fell over 23% during the same period. Given Rite Aid’s $7.3 billion in debt, fiscal year 2017 weakness raises serious concerns about the company’s prospects if the merger fails.

The result has been a triple whammy for RAD stock — the buyout price has been cut, the odds of that buyout are down and the value of Rite Aid stock on its own has weakened due to poor operating performance. Indeed, Deutsche Bank valued a standalone RAD stock at just $2.25 last month.

That leaves shareholders desperate for some kind of good news — any good news — in the Rite Aid earnings report on Tuesday. But investors should be skeptical that such good news will arrive quite yet.

The Walgreens-Rite Aid Merger

Obviously, the focus coming out of Rite Aid earnings will be on the conference call. Investors will be trying to “read the tea leaves” in management commentary relative to expectations as to whether the WBA takeover will be approved. After all, even the low end of Walgreens’ updated range suggests 70%-plus upside for RAD stock — should the merger go through.

The problem in the short term is that the Rite Aid earnings call seems unlikely to offer much clarity. It’s not as if Rite Aid management has inside information on the FTC’s thought process. Meanwhile, the five-person FTC board has three vacancies already, which not only complicates approval but makes forecasting the odds of approval rather difficult. The FTC also has other pressing matters to contend with – including a possible antitrust suit against Qualcomm, Inc. (NASDAQ:QCOM).

Investors expecting game-changing news out of Rite Aid earnings seem likely to be disappointed.

Bear in mind that Walgreens management repeatedly said on its Q2 call earlier this month that it expected the merger to go through. Rite Aid stock stabilized for a few sessions, but then resumed its decline. No matter what Rite Aid executives say at this point, it’s unlikely the market will believe them.

RAD Stock Earnings

If there isn’t major news relative to the Walgreens-Rite Aid merger, as seems likely, then the catalyst will have to come from Rite Aid earnings and sales. That seems unlikely as well.

Rite Aid’s business simply isn’t performing all that well. As noted, same-store sales are down almost 2% year-to-date. In contrast, Walgreens grew comparable store sales 1.8% in the first six months of its fiscal 2017. CVS Health Corp (NYSE:CVS) comps rose 1.9% in 2016. Meanwhile, Fred’s, Inc. (NASDAQ:FRED) — who will purchase hundreds of Rite Aid stores if the WBA-RAD merger goes through — saw a 2%-plus decline in its fiscal 2016 (ending January of this year).

It looks as if Walgreens and CVS are outperforming their smaller competitors. And with Rite Aid having a huge debt load — $7 billion, against a likely ~$1 billion in Adjusted EBITDA this year — that’s a huge problem if the merger doesn’t go through.

Bear in mind that Rite Aid stock was pretty much left for dead not all that long ago, trading around $1 through the end of 2012. If the company can’t get sales and earnings positive, RAD stock could return to those levels.

Buy Rite Aid Stock?

To be honest, I do think RAD stock looks somewhat tempting at current levels. Obviously, RAD is a high-risk play. But assuming Rite Aid stock is worth something in the event the merger falls through, the current price implies a less than 50% chance of FTC approval.

That does seem a bit too low. The divestitures to Fred’s would create a legitimate third competitor to Walgreens and CVS. As an analyst pointed out relative to the potential merger between Sprint Corp (NYSE:S) and T-Mobile US Inc (NASDAQ:TMUS), the rule of thumb is that Republicans want three competitors in an industry, and Democrats four. That in turn implies that the merger should go through under the Trump Administration … at some point.

The near-term problem is that I don’t believe the Rite Aid earnings report will do much for Rite Aid stock — except maybe push it down. Unless there’s a surprise waiting, I don’t think the good news RAD stock needs so desperately is on the way. For aggressive traders, that might create a more attractive entry point. For investors who already own Rite Aid stock, however, the Q4 earnings report could be just one more disappointment.

As of this writing, Vince Martin had no positions in any securities mentioned.