JPMorgan Is Bullish On Rite Aid Before Earnings (Even After Disappointing March Sales)

In a report published Monday, JPMorgan analyst Lisa Gill upgraded shares of Rite Aid Corporation RAD to Overweight from Not Rated with a $10 price target ahead of its fourth quarter results on Wednesday.

Gill noted that Rite Aid's fourth quarter report will remain "somewhat challenged," as the company had previously cited several factors negatively impacting its profitability in the second half of 2015. These factors include: reimbursement pressure, an ongoing promotional environment and the cycling of a favorable reimbursement rate adjustment that positively benefited the fourth quarter 2014 by $25 to $30 million.

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The analyst suggested that the company will earn $0.07 per share with an adjusted EBITDA range of $295 million to $325 million.

Looking forward, the analyst expects improving year-over-year growth in fiscal 2016, driven in part by the McKesson agreement and new generic launches. The company is expected to guide its full year fiscal 2016 EBITDA to $1.30 billion to $1.375 billion, marking a year-over-year growth of 1 to 7 percent of the fiscal 2015 guidance midpoint.

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Posted In: Analyst ColorUpgradesAnalyst RatingsGeneric drugsJPMorganLisa GillMcKessonPharmacy SalesRite Aid
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