Rite-Aid's (RAD) Buy Rating Maintained at Deutsche Bank
Deutsche Bank maintained a Buy rating on Rite-Aid (NYSE: RAD) with a price target of $9. Earlier Rite-Aid reported September comps increased 1.5%. In the view of analyst George Hill, soft script trends were not a surprise.
"Prescription count at comparable stores for the month decreased -0.7%. Pharmacy same store sales for September grew +2.2%, incorporating a -234 bps impact from new generic drug introductions. The negative impact to comp pharmacy sales has increased relative to August’s -222 bps, July’s -221, June’s -226, May’s -179, April’s -145, and March’s -167 bps, as generic penetration increases likely improving mix," said Hill.
"Prescription count at comparable stores decreased -0.7% in September, which is a decline from the average growth of +3.5% in F2015 and the +0.2% growth over the past three months. Recent IMS data indicates y/y prescription growth of about 1.8% and 1.4% over the past three months among all dispensing channels. Though, looking at the past three months, IMS indicates that chain stores are continuing to lose share from other channels, with recent data indicating the lowest retail share we have seen in C2015, which is clearly weighing on Rite Aid. Also of note, while the -0.7% appears disappointing, the September script count growth was on a tough compare of +5.1% in September 2014, which seems to align with management’s Q2 earnings call commentary calling for continued script softness. As such, we already had low expectations going into the quarter for total prescription sales growth, with our FQ3-16 forecast at a modest 0.7%," added the analyst.
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