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Drugstore Trade: Sickly Or On The Mend?

Over the past 6 months shares of CVS are down about 5%, while rival Rite Aid is down 22%. Should you swallow hard and buy?

CVS reported its quarterly results Monday. Here's how its latest quarter compares with its two biggest rivals.

CVS

In the fourth quarter ended Dec. 31, CVS Caremark Corp. posted a profit of $1.05 billion, or 74 cents per share, on revenue of $25.82 billion. CVS said $14.46 billion in revenue came from its drugstores. Profit topped expectations, but revenue came in slightly shy.

Rite Aid

In its fiscal third quarter, which ended Nov. 28, Rite Aid Corp. narrowed its loss to $86.1 million after paying preferred dividends, or 10 cents per share, on $6.35 billion in revenue. The results beat Wall Street expectations.

Walgreen

In its fiscal first quarter, which ended Nov. 30, Walgreen Co. reported a profit of $489 million, or 49 cents per share, on revenue of $16.36 billion. The results beat analysts' average estimates.

Considering the latest numbers, what’s the trade?

I'm bullish CVS and Walgreen, says Thomas Weisel analyst Steven Halper. CVS can grow margins through its PBM business while Walgreen can grow its margins through controlled growth.


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