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Rite Aid (RAD): Can the Stock Sustain its Solid Momentum?
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Drug-store retailer, Rite Aid Corporation looks quite attractive, given its solid stock price performance. Evidently, this third largest U.S. retail drugstore chain has jumped 7.7% on a year-to-date basis, outperforming the Zacks categorized Retail – Drug Stores industry, which fell 9.9% over the same time frame.
The company, with robust fundamentals, came into further limelight when it scaled a 52-week high of $8.50 on the last trading day, before eventually closing trade at $8.44. Shares gained 3.6%. So, it’s time we gain an insight into what’s driving Rite Aid’s momentum.
What’s Driving Rite Aid?
Rite Aid has been undertaking a number of strategies to drive growth such as the expansion of its pharmacy and clinical services, and reduction of its costs. Alongside, the company has deployed resources, including the introduction of HealthSpot telehealth booths at its Ohio pharmacies, addition of RediClinics to its stores, its Wellness+ with Plenti program, as well as the Flu Immunization program to drive demand amid a soft macroeconomic scenario.
On the cost front, the company is focusing on generating cost savings through centralized indirect procurement of drugs and reduction in supply chain costs. The company also acquired EnvisionRx, which will enable it to offer cost-friendly health plans and solutions to employers, drive growth and bolster shareholder value. We believe that these programs and initiatives will enable the company to increase its customer base and facilitate the generation of long-term profitability as well.
Further, the company is on track with its merger with the leading U.S. drugstore retailer, Walgreens Boots Alliance, Inc. (WBA - Free Report) , as was announced in Oct 2015. Expected to close in the second half of calendar 2016, the drugstore behemoth that will arise from the deal will have a superior network that will cater to more health and wellness solutions both in stores and online. Following the completion of the transaction, Rite Aid will operate as a wholly owned subsidiary of Walgreens.
However, Rite Aid faces intense competition from other healthcare companies, which have merged to form large enterprises. This may weigh upon Rite Aid’s bargaining power. Also, the company’s generic drug sales have been adversely affected by entry of big-wigs like Wal-Mart Stores, Inc. (WMT - Free Report) into the retail generic drug market. Pharmacy reimbursement rate pressured Rite Aid’s second-quarter fiscal 2017 results and is expected to continue through the rest of the fiscal year, posing concerns.
Nonetheless, the company has undertaken various strategies to counter the stiff competition and enhance market share. These include its focus on remodeling its wellness stores, by adding attractive features, thereby enabling the company to generate increased sales. Additionally, Rite Aid started accepting digital payment options like Apple Inc’s (AAPL - Free Report) Apple Pay, Google Wallet, and other tap and pay credit and debit cards. These efforts are likely to enrich consumers’ experience that in turn will attract more traffic.
These factors, combined with Rite Aid’s Health Alliance program, usher in confidence about the company’s performance. In fact, the company is slated to report third-quarter fiscal 2017 earnings on Dec 22, 2016. While the company has a mixed performance history over the trailing for quarters, let’s see what’s in store for this quarter.
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Rite Aid (RAD): Can the Stock Sustain its Solid Momentum?
Drug-store retailer, Rite Aid Corporation looks quite attractive, given its solid stock price performance. Evidently, this third largest U.S. retail drugstore chain has jumped 7.7% on a year-to-date basis, outperforming the Zacks categorized Retail – Drug Stores industry, which fell 9.9% over the same time frame.
The company, with robust fundamentals, came into further limelight when it scaled a 52-week high of $8.50 on the last trading day, before eventually closing trade at $8.44. Shares gained 3.6%. So, it’s time we gain an insight into what’s driving Rite Aid’s momentum.
What’s Driving Rite Aid?
Rite Aid has been undertaking a number of strategies to drive growth such as the expansion of its pharmacy and clinical services, and reduction of its costs. Alongside, the company has deployed resources, including the introduction of HealthSpot telehealth booths at its Ohio pharmacies, addition of RediClinics to its stores, its Wellness+ with Plenti program, as well as the Flu Immunization program to drive demand amid a soft macroeconomic scenario.
On the cost front, the company is focusing on generating cost savings through centralized indirect procurement of drugs and reduction in supply chain costs. The company also acquired EnvisionRx, which will enable it to offer cost-friendly health plans and solutions to employers, drive growth and bolster shareholder value. We believe that these programs and initiatives will enable the company to increase its customer base and facilitate the generation of long-term profitability as well.
Further, the company is on track with its merger with the leading U.S. drugstore retailer, Walgreens Boots Alliance, Inc. (WBA - Free Report) , as was announced in Oct 2015. Expected to close in the second half of calendar 2016, the drugstore behemoth that will arise from the deal will have a superior network that will cater to more health and wellness solutions both in stores and online. Following the completion of the transaction, Rite Aid will operate as a wholly owned subsidiary of Walgreens.
However, Rite Aid faces intense competition from other healthcare companies, which have merged to form large enterprises. This may weigh upon Rite Aid’s bargaining power. Also, the company’s generic drug sales have been adversely affected by entry of big-wigs like Wal-Mart Stores, Inc. (WMT - Free Report) into the retail generic drug market. Pharmacy reimbursement rate pressured Rite Aid’s second-quarter fiscal 2017 results and is expected to continue through the rest of the fiscal year, posing concerns.
Nonetheless, the company has undertaken various strategies to counter the stiff competition and enhance market share. These include its focus on remodeling its wellness stores, by adding attractive features, thereby enabling the company to generate increased sales. Additionally, Rite Aid started accepting digital payment options like Apple Inc’s (AAPL - Free Report) Apple Pay, Google Wallet, and other tap and pay credit and debit cards. These efforts are likely to enrich consumers’ experience that in turn will attract more traffic.
These factors, combined with Rite Aid’s Health Alliance program, usher in confidence about the company’s performance. In fact, the company is slated to report third-quarter fiscal 2017 earnings on Dec 22, 2016. While the company has a mixed performance history over the trailing for quarters, let’s see what’s in store for this quarter.
Rite Aid currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>