NEW YORK (TheStreet) -- People around the world are living longer, owed to better medicines and a heightened social awareness of health and wellness. The global increase in life expectancy has been described as one of society's greatest achievements. And longer lives are good business for Rite Aid (RAD), the third-largest drugstore chain in the U.S. by annual revenue.
Rite Aid, headquartered in Camp Hill, Pa., will report first-quarter fiscal 2016 earnings Thursday before the opening bell. The company, which competes with larger rivals Walgreens Boots Alliance (WBA) and CVS Health (CVS), has made health and wellness its priority. And investors are eager to see the fruits of those efforts.
For the quarter that ended May, Rite Aid is projected to earn 3 cents per share, down from 4 cents last year, on revenue of $6.65 billion, up 3% year over year. For the full year ending in February, earnings are projected to be 26 cents per share, down from 42 cents last year, while revenue of $27 billion calls for a 3% increase year over year.
These numbers reflect Rite Aid's current restructuring efforts as it continues to nurse profits back to health, as explained by TheStreet's Jim Cramer.
To push its wellness store format, Rite Aid aims to remodel some 450 of its stores in 2015. The company, which operates roughly 4,500 U.S. stores, plans to drive more growth by expanding both its clinical services and its pharmacy business. The new model is showcased at its Harrisburg, PA, outlet -- a store that spans more than 14,500 square feet.
These initiatives, among others, have been a boon for Rite Aid stock, which is up more than 13% in 2015 and has skyrocketed more than 50% just in the past six months. It would seem the market has embraced Rite Aid's growth strategy. Even despite these gains, there is minimal risk implied in taking a position here on Rite Aid stock as evidenced by its price-to-earnings ratio of 4, which is 17 points below the S&P 500 index (SPY), which trades at a P/E of 21.
That's likely why Rite Aid stock has garnered a consensus buy rating and an average analyst 12-month price target of $10, up from current levels of $8.85 per share as of Tuesday morning trading.
Why are analysts so confident? Rite Aid's execution includes three straight quarters of earnings beats and seven straight revenue beats. Plus, the company is betting on the future, looking to diversify its offerings with its recent deals.
For instance, to better compete with CVS Health and Express Scripts (ESRX), Rite Aid earlier this year picked off pharmacy benefit manager EnvisionRx for $2 billion -- a deal that gives Rite Aid the ability to run prescription drug plans.
This means Rite Aid's growth is still in its early stages, especially given an aging American population that will require better health care and a larger pool of insured people due to the Affordable Care Act, a.k.a. Obamacare.
Rite Aid looks well-positioned to create value for its investors. It is projected to grow fiscal-year 2017 earnings by almost 40%. And with May same-store sales climbing 2.1% and total drugstore sales reaching $2.53 billion, up 2%, it's tough to bet against Rite Aid's streak of earnings beats ahead of Thursday's earnings report.