Weekly Drug Store Notes: RAD, CVS, WAG

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RAD: Rite Aid logo
RAD
Rite Aid

The aging U.S population, new drug therapies and the Affordable Care Act expanding insurance to millions of Americans are some of the key factors driving growth in the U.S. pharmaceutical industry. Since the end of 2012, CVS, Walgreen, and Rite Aid (the leading pharmacies in the U.S.) have significantly outperformed the S&P 500 index. [1] So far this year, CVS, Walgreen and Rite Aid have witnessed an approximate 15%, 13% and 30% rise in their stock price, respectively. In comparison, the S&P 500 index has gained only 10% year-to-date.

Below is a weekly update (1st to 5th September) on the three companies.

Rite Aid

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Last week, Rite Aid (NYSE: RAD) reported its same-store-sales for the month of August and Q2 2014 ended August 31. The company also announced that it will release its full Q2 2014 earnings on September 18 (read: Rite Aid Reports Another Quarter Of Rising Sales In Q2’14).

Rite Aid’s stock increased marginally (~3.2%) last week. Our valuation of $5.80 for the company is at an approximate 10% discount to the current market price. For calendar year 2014, we expect Rite Aid to report earnings of $26 billion and net income of $160 billion. Our fiscal year 2014 (ended February) non-GAAP EPS forecast for the company is $0.45, compared to the market consensus of $0.34 ( as per Reuters).

View our full analysis for Rite Aid

Walgreen

Walgreen (NYSE:WAG) also reported its sales figure for August 2014 (ended August 31) along with the Q4 2014 sales, last week (read: Walgreen Reports Strong Q4’14 Sales But Gross Margin Remains Under Pressure). The company announced that it is offering more than $10 million worth of flu shot vouchers free to those without health insurance coverage and unable to afford a flu shot without the voucher, for the fifth consecutive year. Since 2010, more than half a million individuals have received free flu shots and vouchers through Walgreen’s partnership with the U.S. Department of Health and Human Services (HHS).

Walgreen’s stock was pretty stable at the start of last week, but gained more than 5% after the August and Q4 2014 sales release. Our price estimate of $63 for the company is in line with the current market price, and translates into market cap of around $61 billion. Our calendar 2014 revenue and net income forecast for Walgreen stand at $77 billion and $3 billion, respectively. For fiscal year 2014 (ended August), we forecast non-GAAP EPS of $3.36 as compared to the market consensus of $3.31.

View our full analysis for Walgreen

CVS

Last week, CVS Caremark (NYSE:CVS) changed its corporate name to “CVS Health” to reflect the company’s broader health care commitment. As a further demonstration of its commitment to health, CVS Health also announced the end of tobacco sales at its stores as of September 3. CVS is the only national pharmacy chain to take this step in support of the health and well-being of its patients and customers. The company also released the final results of its tender offers. (Read Press Release)

CVS’ stock gained marginally last week (~2.5%). Our price estimate of $77 for the company is marginally lower than the current market price (translates into market cap of approximately $95 billion). Our 2014 revenue and net income estimate for CVS is $138 billion and $6.2 billion, respectively. We estimate non-GAAP EPS of $5.67 for the company, compared to the market consensus of $4.49.

View our full analysis for CVS

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Notes:
  1. Rite Aid, Walgreen, and CVS: Growth Becomes the New Driver, The Motley Fool, April 6, 2014 []