Rite-Aid (RAD) Buy Rating Reiterated at Goldman Sachs

Goldman Sachs maintained a Buy rating on Rite-Aid (NYSE: RAD) with a price target of $9.00. The stock declined after updating guidance. Analyst Robert P. Jones continues to see tailwinds.

"RAD’s FY15 guidance reduction overshadowed a strong May SSS report. Revised guidance partly reflects timing, with the benefits of lower generic purchasing costs from MCK now expected to start in F’2Q instead of F’1Q, with the remainder due to greater pressure on reimbursement rates. Although the guidance reset is a disappointment and a reminder of the challenges pharmacies have in predicting reimbursement rates, we see very strong fundamental tailwinds for RAD and the group," said Jones.

"Given improving trends and our confidence in the benefits from the new purchasing deal with MCK, we are comfortable with the now back half-weighted earnings cadence. We note revenue guidance was unchanged and that over the last three years, RAD has exceeded the midpoint of adjusted EBITDA guidance by an average of 15%," he added.

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 $8.50 yesterday.

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