Analysts: Strong cost controls help Rite Aid

Analysts: Strong cost controls help drugstore chain Rite Aid continue to post earnings growth

Associated Press

Rite Aid Corp. is using strong cost controls to help it continue to report earnings growth, according to a couple analysts who rate shares of the drugstore chain "Outperform."

The Camp Hill, Pa., company reported its third-straight quarterly profit on Thursday, as generic drugs and reductions in selling, general and administrative expenses, among other costs, helped its performance.

THE OPINION: Rite Aid's earnings before interest, taxes, depreciation and amortization, or EBITDA, of $344.8 million topped Credit Suisse's initial estimate for the quarter of $309 million, analyst Edward J. Kelly said in a research note. He noted that the company benefited from industry-wide trends like an increase in generic drug use that helps profitability, but good company cost control also helped.

"While it's clear that Rite Aid is benefiting from industry tailwinds, internal execution also remains strong," Kelly wrote.

Raymond James analyst John W. Ransom said in a separate note the stock trades at a slight discount to its peers, despite the potential for future gains.

THE STOCK: Up 3 cents to $2.91 in Friday afternoon trading, after dropping as low as 95 cents earlier in the session. The stock had soared since closing 2012 at $1.36, but the shares dropped more than 7 percent Thursday after the company announced its quarterly results.

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