On Jan 30, we upgraded drugstore chain retailer,
Rite Aid Corporation
) to Outperform based on the company's impressive performance
during the third-quarter of fiscal 2013 and an upbeat
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
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
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
GNC Holdings Inc
) all carrying a Zacks Rank #2 (Buy) and are expected to continue
with their upbeat performances.
AMERISOURCEBRGN (ABC): Free Stock Analysis
GNC HOLDINGS (GNC): Free Stock Analysis
HERBALIFE LTD (HLF): Free Stock Analysis
RITE AID CORP (RAD): Free Stock Analysis
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