UBS Reiterates a 'Neutral' on Rite-Aid (RAD); A Few Longer-Term Tailwinds, But Staying Sidelined For Now

June 8, 2012 10:25 AM EDT
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Price: $8.63 -0.46%

Rating Summary:
    9 Buy, 6 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 11 | Down: 20 | New: 54
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UBS reiterates a 'Neutral' on Rite-Aid (NYSE: RAD) price target of $1.35 (from $1.80).

Analyst, Jason DeRise, said, "RAD shares have underperformed the market by ~30% in the last 3mos. Despite this, we believe the best place for shareholders is the sidelines because RAD’s fundamental performance has trended weaker than expected. Though its business remains challenged; RAD has at least two industry tailwinds to its back to support its very gradual turnaround: (1) aging population and (2) the generic wave. If RAD can pay down its debt over the long term, we believe its equity value can grow materially. For now, we think there is too much uncertainty to discount this LT bull case into today’s price."

DeRise also sees sustained improvements in prescription sales as the Walgreen (NYSE: WAG) / Express Scripts (Nasdaq: ESRX) battle continues. However, the most recent report was negative from RAD, which explains the Neutral rating. Because of the current embattled environment (with RAD not capitalizing as quickly), DeRise cuts FY13 EPS loss from (0.18) to (0.22) and FY14 from (0.04) to (0.08).

For an analyst ratings summary and ratings history on Rite-Aid click here. For more ratings news on Rite-Aid click here.

Shares of Rite-Aid closed at $1.24 yesterday.

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