Goldman Reiterates Attractive Coverage of Drug Chains

On Wednesday, Goldman Sachs analyst Robert Jones released a note reiterating his Attractive coverage view on the drug retail landscape. The space should be driven by “compelling out year earnings stories, improving comps helped by ACA (1-2% sales/earnings tailwind), and company-specific growth drivers,” said Jones. The analyst believes consolidation of generic purchasing should “combat margin pressure from lower reimbursement rates and competition at the front-end.” In the note, Jones upgraded shares of Rite Aid RAD from Neutral to Buy. The analyst also has a Buy rating on Walgreens WAG and raised his price target from $79 to $67 to “better reflect the earnings growth opportunity by the WAG/Boots combination.” Jones has a Neutral rating on CVS CVS and maintained his $71 price target and sees “the lowest relative upside from its generic purchasing JV with CAH beyond the $100M annual payment ($0.02/share for half of 2014).” While shares of Walgreens and CVS are relatively flat, Rite Aid has jumped 5.6 percent on the back of the Goldman upgrade.