On Wednesday, Goldman Sachs analyst Robert Jones released a note reiterating his Attractive coverage view on the drug retail landscape.
The space should be driven by “compelling out year earnings stories, improving comps helped by ACA (1-2% sales/earnings tailwind), and company-specific growth drivers,” said Jones.
The analyst believes consolidation of generic purchasing should “combat margin pressure from lower reimbursement rates and competition at the front-end.”
In the note, Jones upgraded shares of Rite Aid (NYSE: RAD) from Neutral to Buy.
The analyst also has a Buy rating on Walgreens (NYSE: WAG) and raised his price target from $79 to $67 to “better reflect the earnings growth opportunity by the WAG/Boots combination.”
Jones has a Neutral rating on CVS (NYSE: CVS) and maintained his $71 price target and sees “the lowest relative upside from its generic purchasing JV with CAH beyond the $100M annual payment ( $0.02 /share for half of 2014).”
While shares of Walgreens and CVS are relatively flat, Rite Aid has jumped 5.6 percent on the back of the Goldman upgrade.
(Jones also upgraded MCK to their conviction buy list, by the way)
I bought a bit more just before the close. Don't understand a large drop before earnings when the last 3 months have each beat expectations for sales. Did I just read where market is looking for 3 cent drop from prior year, this could be a big beat. If I am missing something please share.