We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Rite Aid Ups Game in PBM Space Via Bartell Drugs' Buyout
Read MoreHide Full Article
Shares of Rite Aid Corporation were up more than 6% during the close of the trading session on Oct 7, following the announcement of its buyout deal with Bartell Drugs. The company has signed a definitive agreement to acquire Bartell Drugs for $95 million. This deal is likely to conclude by the end of fiscal 2021 and subject to customary closing conditions.
This Zacks Rank #4 (Sell) company also updated its fiscal 2021 view for capital expenditures and free cash flow, which include this agreement. It now anticipates capital expenditures to be $300-$325 million, up from the earlier guided view of roughly $275 million. Also, free cash flow is likely to be $60-$135 million.
Further, Bartell Drugs, which boasts of more than $550 million in revenues on an annual basis, will add to Rite Aid’s existing product portfolio and help boost its RxEvolution strategy. After a year of the acquisition, it is estimated to contribute to Rite Aid’s bottom line. Also, the move is likely to position Rite Aid well in the mid-market business, per sources.
What Else You Should Know
Management remains focused on strengthening its foothold in mid-market PBM, bringing innovation across its retail and mail-order pharmacy channels, enhancing the in-store experience by curated digital offerings, improving merchandises and rebranding its image with a new logo. The company continues to witness a solid performance in PBM, in terms of mail orders, with a client retention rate of nearly 95% for the 2021 selling period. Notably, sales from mail orders grew 21% year over year during the fiscal second quarter on the back of a rise in Medicare Part D membership and COVID-19.
Moreover, the company is on track with its growth strategy, which focuses on leveraging unique opportunities such as Elixir, enhancing the front-end channels and transforming processes to deliver operational efficiency. Going ahead, management remains optimistic about the progress of the transition to Elixir, which is expected to be completed by this year. In fact, encouraged by the demand for flu immunizations, enhanced pharmacy network management at Elixir and cost savings, it now expects revenues to be $23.5-$24 billion with same-store sales growth of 3-4%.
Apart from these, Rite Aid is benefiting from the expansion of services to its customers amid the COVID-19 crisis. The company has been providing home delivery services to customers with an eligible prescription, with the benefit of zero delivery fees. Customers can avail pick-up services for prescriptions and over-the-counter products as well as the drive-through option. It has launched Buy Online Pickup In Store initiative in a bid to offer better drive-through and curbside pickup options. Also, the company expanded the Instacart delivery facility to more than 2,400 locations and received positive feedback for the same. Moreover, the surge in demand for Tele Health in the wake of COVID-19 has led the company to accelerate the launch of Rite Aid Virtual Care.
Further, the riteaid.com website and mobile app have been redesigned with improved online shopping facilities for consumers. The company has partnered with ScriptDrop to expedite the prescription delivery process. Consumers can now avail doorstep prescription delivery from all Rite Aid stores. This facility is being rolled out in a phased manner and will be completed by the end of fiscal 2021.
Despite continued uncertainty of the COVID-19 situation, Rite Aid’s efforts to offer convenient shopping experiences to customers along with its RxEvolution strategy and Elixir are likely to uphold the stock. The stock has gained 25.8% year to date against the industry’s decline of 9%.
Target Corporation (TGT - Free Report) has an expected long-term earnings growth rate of 7.2% and a Zacks Rank #1.
Lowes Companies (LOW - Free Report) , which presently carries a Zacks Rank #1, has an expected long-term earnings growth rate of 16.6%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Image: Shutterstock
Rite Aid Ups Game in PBM Space Via Bartell Drugs' Buyout
Shares of Rite Aid Corporation were up more than 6% during the close of the trading session on Oct 7, following the announcement of its buyout deal with Bartell Drugs. The company has signed a definitive agreement to acquire Bartell Drugs for $95 million. This deal is likely to conclude by the end of fiscal 2021 and subject to customary closing conditions.
This Zacks Rank #4 (Sell) company also updated its fiscal 2021 view for capital expenditures and free cash flow, which include this agreement. It now anticipates capital expenditures to be $300-$325 million, up from the earlier guided view of roughly $275 million. Also, free cash flow is likely to be $60-$135 million.
Further, Bartell Drugs, which boasts of more than $550 million in revenues on an annual basis, will add to Rite Aid’s existing product portfolio and help boost its RxEvolution strategy. After a year of the acquisition, it is estimated to contribute to Rite Aid’s bottom line. Also, the move is likely to position Rite Aid well in the mid-market business, per sources.
What Else You Should Know
Management remains focused on strengthening its foothold in mid-market PBM, bringing innovation across its retail and mail-order pharmacy channels, enhancing the in-store experience by curated digital offerings, improving merchandises and rebranding its image with a new logo. The company continues to witness a solid performance in PBM, in terms of mail orders, with a client retention rate of nearly 95% for the 2021 selling period. Notably, sales from mail orders grew 21% year over year during the fiscal second quarter on the back of a rise in Medicare Part D membership and COVID-19.
Moreover, the company is on track with its growth strategy, which focuses on leveraging unique opportunities such as Elixir, enhancing the front-end channels and transforming processes to deliver operational efficiency. Going ahead, management remains optimistic about the progress of the transition to Elixir, which is expected to be completed by this year. In fact, encouraged by the demand for flu immunizations, enhanced pharmacy network management at Elixir and cost savings, it now expects revenues to be $23.5-$24 billion with same-store sales growth of 3-4%.
Apart from these, Rite Aid is benefiting from the expansion of services to its customers amid the COVID-19 crisis. The company has been providing home delivery services to customers with an eligible prescription, with the benefit of zero delivery fees. Customers can avail pick-up services for prescriptions and over-the-counter products as well as the drive-through option. It has launched Buy Online Pickup In Store initiative in a bid to offer better drive-through and curbside pickup options. Also, the company expanded the Instacart delivery facility to more than 2,400 locations and received positive feedback for the same. Moreover, the surge in demand for Tele Health in the wake of COVID-19 has led the company to accelerate the launch of Rite Aid Virtual Care.
Further, the riteaid.com website and mobile app have been redesigned with improved online shopping facilities for consumers. The company has partnered with ScriptDrop to expedite the prescription delivery process. Consumers can now avail doorstep prescription delivery from all Rite Aid stores. This facility is being rolled out in a phased manner and will be completed by the end of fiscal 2021.
Despite continued uncertainty of the COVID-19 situation, Rite Aid’s efforts to offer convenient shopping experiences to customers along with its RxEvolution strategy and Elixir are likely to uphold the stock. The stock has gained 25.8% year to date against the industry’s decline of 9%.
3 Better Ranked Stocks to Consider
The Kroger Co. (KR - Free Report) has an impressive long-term earnings growth rate of 6.2% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Target Corporation (TGT - Free Report) has an expected long-term earnings growth rate of 7.2% and a Zacks Rank #1.
Lowes Companies (LOW - Free Report) , which presently carries a Zacks Rank #1, has an expected long-term earnings growth rate of 16.6%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>