Rite Aid Upped to Outperform - Analyst Blog
31 Januar 2013 - 6:50PM
Zacks
On Jan 30, we upgraded drugstore chain retailer, Rite
Aid Corporation (RAD) to Outperform based on the company’s
impressive performance during the third-quarter of fiscal 2013 and
an upbeat guidance.
Why the Upgrade?
Rite Aid reported earnings of 7 cents a share that fared
significantly better than both the year-ago quarter’s loss of 6
cents as well as the Zacks Consensus Estimate of a loss of 4 cents.
Results also improved sequentially as the company swung back to
profit, reflecting rise in front-end sales, favorable script trends
and introduction of new generic medications.
Rite Aid's gross margin expanded 250 basis points to 29.0%
during the quarter, while adjusted EBITDA margin expanded 120 basis
points to 4.7%. Consequently, the company now expects bottom-line
results to come in the range of a loss per share of 5 cents to
earnings per share of 3 cents, up from its previous guidance of
loss per share in the range of 9 cents – 23 cents.
The strong positive bias on this Zacks Rank #1 (Strong Buy)
company has been fuelled by several strategic steps taken to boost
its long-term profitability. Rite Aid is focusing on expanding its
pharmacy and clinical services and striving to abridge costs.
The company’s Wellness+ customer loyalty program has been
successful in luring customers as the Wellness+ members now account
for 76% of front end sales compared with 72% in the year-ago
quarter. On the cost front, the company is focusing on generating
cost savings through centralized indirect procurement of drugs and
reduction in supply chain costs.
Going forward, Rite Aid remains focused on expanding its
portfolio of generic medications, which in turn will facilitate the
company in enhancing margins.
Other Stocks to Consider
Besides Rite Aid, other stocks in the healthcare industry that
are worthy of a consideration include AmerisourceBergen
Corporation (ABC), GNC Holdings Inc.
(GNC) and Herbalife Ltd. (HLF) all carrying a
Zacks Rank #2 (Buy) and are expected to continue with their upbeat
performances.
AMERISOURCEBRGN (ABC): Free Stock Analysis Report
GNC HOLDINGS (GNC): Free Stock Analysis Report
HERBALIFE LTD (HLF): Free Stock Analysis Report
RITE AID CORP (RAD): Free Stock Analysis Report
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