Rite Aid Corporation (NYSE:RAD) rides profit-wave on generic drug sales

Posted by Lynn Eisler September 20, 2013 0 Comment 897 views

Rite Aid Corporation (NYSE:RAD) is the 3rd largest drugstore chain in the United States. The company hiked its profit projections for 2013 after it reported a quarterly profit for the 4th consecutive quarter. This has largely been due to the boost in high-margin generic drug sales.

The earnings projection for the year ending February has been raised from 4-19 cents to 18-27 cents. The lower end of the earnings forecast range has also been increased from $24.9B-$25.3B to $25.1-$25.3. The average analyst projection has been 14 cents per share profit on$25.31B revenue. However, Rite Aid Corporation (NYSE:RAD) said that its projections had been way lower.

The company has competitors such as CVS Caremark Corp and Walgreen Co and they too have been benefited from this trend. Generic drugs tend to cost lower and the profit margins are higher. This also means that the companies tend to make higher profits but the low price tags on these drugs also lower their revenue.

Conservative figures

Rite Aid Corporation (NYSE:RAD) has been cautious and had warned that the same-store sales in 2013 would be plateaued. It had reported a $32.8M revenue or 3cents/share in the Q2 in comparison to the $38.8M or 5 cents/share net loss which it had a year prior. Revenue rose to $6.28B which was a rise of 0.8% and there was a 1% rise in same-store sales. On an average, analysts had projected 4cents/share loss on $6.27B revenue.

Thursday trading

In Thursday’s trading session, Rite Aid Corporation (NYSE:RAD) stock rose by 23.45%. The opening price of the shares was $4.21 which climbed to an intraday high of $4.65 and closed at $4.58. Approximately 114.33 million shares exchanged hands in Thursday’s trading. The average volume of shares traded over a period of 30 days was 15.90 million. The 52-week low of the shares is $0.95 while the 52-week high is $4.65. The company has a market cap of 4.17 billion.

About Lynn Eisler

Lynn Eisler is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments. Lynn has been honored with the H.L. Mencken Award for Investigative Reporting, the Champion of Justice Award for reporting on the drug war, and the John Hancock Award for business reporting. Lynn was also a Knight Medical School Fellow at the University of Michigan.

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