Walgreens (WAG) and CVS (CVS) Leave Rite-Aid (RAD) Behind

Walgreens reached an agreement to continue in CVS Caremark’s pharmacy benefit program today and both stocks gapped up this morning. CVS shares rose 3 percent while WAG shares rose 3.5 percent. Rite Aid lost got some spillover attention from the news, but shares dropped almost 1 percent.

CVS Caremark (NYSE: CVS)

CVS Caremark has a market cap of $43,657M and is the largest pharmacy health care provided in the US. The company provides pharmacy benefits services to more than 64,000 pharmacies including over 7000 CVS stores.

In its first-quarter earning release, the company reported EPS increased 8.8 percent to $0.60 on record revenues of $23 billion.

Comments: It was good news for CVS Caremark today. The stock took a big hit in June when Walgreens announced it would no longer participate in CVS pharmacy network and the stock dropped about 15 percent. The stock bounced back but nowhere near its high of $38.27 reached last November. Stochastic says the stock is overbought and volume is weakening. The stock has room to grow to the upside and is rated a buy or strong buy by several analysts, but you will find better technicals in a stronger market with stronger volume.

Walgreens (NYSE: WAG)

Walgreens, with a market cap of $29,441M and 7522 drugstores, is the largest drugstore chain with $63 billion in 2009 sales.

In its second-quarter earnings release, WAG reported earnings per share increased 4.6 percent to 65 cents a share on record revenues of $17 billion.

Comments: WAG pays a higher-yield on its dividend than CVS but both stocks have fallen in price since the open. Again the technicals are improving but the broader market is a drag. WAG reports earnings June 22 and could provide an opportunity for a tidy profit.

Rite Aide (NYSE: RAD)

Rite-Aid has nearly 4800 stores with annual revenues of about $25.7 billion and a market cap of $1012M.

RAD reported a net loss of $0.24 per share for the fourth quarter on revenues of $6.5 billion. For the full year, the company reported a net loss of $0.59 per diluted share compared to the prior year net loss of $3.49 per diluted share.

The company stressed its improvements in front-end margins and administrative expenses, which improved its liquidity position, but faulted reduction in reimbursements rates for its earnings performance.

Comments: The bad news keeps coming for RAD as the company is reporting sales decreases each month since their last earnings report. Plus reimbursement reductions are not likely to improve in the near-term, so earnings are not likely to improve significantly. Trading volume is falling off the cliff. I don’t see this company making a comeback any time soon.

Disclosure: No positions.

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