Why Rite Aid (RAD) is Gaining on Tuesday

NEW YORK (TheStreet) -- Rite Aid (RAD) is gaining on Tuesday after announcing an expanded distribution agreement with drug retailer McKesson (MCK).

By midmorning, shares had added 5.3% to $6.24. Trading volume of 21.5 million had nearly surpassed its three-month daily average of 22.6 million.

The companies said the new relationship will drive greater supply chain efficiencies for both Rite Aid and McKesson. The five-year agreement will extend through to March 2019, leveraging Rite Aid's position as a leading drugstore chain and McKesson as a leader in pharmaceutical sourcing.

"The combination of Rite Aid's and McKesson's generic purchasing scale and sourcing expertise, in conjunction with McKesson's industry-leading drug distribution capabilities, will enable us to achieve supply chain efficiencies, provide even better service to Rite Aid customers, and generate additional cash flow to fuel our company's growth," said Rite Aid CEO John Standley in a statement.

Financial terms of the agreement were not disclosed.

Must Read: Rite Aid (RAD) and Walgreen (WAG) Rise on CVS Caremark (CVS) Tobacco Announcement

TheStreet Ratings team rates RITE AID CORP as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate RITE AID CORP (RAD) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including poor profit margins and weak operating cash flow."

If you liked this article you might like

Walgreens Is Primed to Rally, With or Without Rite Aid

S&P 500 and Dow Score Records With Wall Street Upbeat Ahead of Fed

S&P 500 and Dow on Track for Records With Markets in Good Mood Ahead of Fed

Walgreens to Tweak Number of Rite Aid Stores It Buys to Win Regulatory Approval

Will the FTC Let Walgreens Go on a $5.2 Billion Rite Aid Shopping Spree?