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The medical emergency of the last few years has significantly changed the structure and trends of the retail – pharmacy and drugstore industry. Exponential growth in demand for telemedicine services and remote patient care amid supply chain disruptions and staffing shortages within healthcare is driving the demand for retail pharmacy business. In particular, mail-order pharmacies are experiencing growth with telemedicine and telemonitoring services, creating unique opportunities for heavyweights within the industry to: CVS Health (CVS – free report), walgreens boots alliance (WBAs – free report) and light aid (rad – During this period, we strategically invested in providing patients with easy access to prescription and maintenance medications.
However, the majority of retail drugstores have been southbound due to continued pressure on drug pricing and reimbursement. industry players saw a significant decline in pandemic-driven revenue generation asLast but not least, recognizing the huge growth prospects in this sector, there are many new entrants in this industry, making the sector more competitive. Amazonof (AMZN – Free Report) Entry into the retail drugstore space has created survival issues among incumbents.
industry description
Zacks Retail – The pharmacy and drug store industry includes a variety of prescription and over-the-counter drug retailers. An extensive retail network of companies within the retail pharmacy industry provides advanced health solutions to patients, customers, and caregivers. Over the past few years, the scope of the retail pharmacy and drugstore market has expanded exponentially. In North America, some of these entities have evolved to add wellness products and groceries to their traditional prescription and over-the-counter drug portfolios. , one of the “Big 3” in the drugstore space. But a non-healthcare leader like Amazon entered the U.S. healthcare space in 2018 with the acquisition of his pharmacy delivery startup PillPack.
Three trends shaping the future of retail – the pharmacy and drugstore industry
Industry trends remain dark amid reimbursement pressure: Protect high-margin original drugs with a reliable supply chain. However, low-margin generics with fragile supply chain networks are bearing the brunt of the economic downturn caused by the pandemic. Pharmaceutical retailers are also witnessing constantly rising drug prices due to rising drug raw material costs. Industry players are now grappling with continued pressure from non-reimbursable pharmacy costs, which has significantly lowered bulk demand for prescription drugs, over-the-counter drugs and immunizations. It is widely observed that patients are replacing prescription drugs with lower-cost generic drugs.
Threat of Amazon entering brick-and-mortar stores: A Business Insider report on May 26, 2021 led to speculation that there were discussions about Amazon setting up independent stores in several locations, including Boston and Phoenix. Amazon is considering plans to put pharmacies inside Amazon-owned Whole Foods stores, according to a report citing . Previously, after entering, the e-commerce giant grabbed a sizable chunk of the online pharmacy market from the traditional retail drugstore space. stocks in a tighter spot.
Online pharmacy and mail order boom: Since the start of the pandemic, widespread stay-at-home orders have significantly shifted demand for mail order and online pharmacies. Experts say this transition is expected to continue even after the pandemic is over. Data shows that COVID-19 is only accelerating an already high demand for e-pharmacy and mail-order delivery systems. According to Patch Report, “Two years ago, 11% of his adult pharmacy customers in the U.S. obtained a prescription from an online pharmacy, based on a study conducted by his CivicScience, a market research firm. . [.] According to the online statistics portal Statista.com, this number has been steadily increasing year after year. With Amazon’s big foray into healthcare, the retail pharmacy industry has entered a new phase of fierce competition. To combat this competition, companies are strategically looking to scale and scale.
Zacks industry ranks show dull near-term outlook
The industry’s Zacks industry rank, which is essentially the average of all member stocks’ Zacks ranks, presents a bleak near-term outlook. Zacks Retail – Included in the broader Zacks Retail and Wholesale sector, the Zacks Retail – Pharmacies and Drug Stores industry currently holds Zacks Industry Rank #174, placing it in the bottom 31% of over 250 Zacks industries . Our research shows that the top 50% of industries ranked by Zacks are more than twice as good as the bottom 50%.
Here are some stocks that have the potential to outperform the market based on their strong earnings outlook. But it’s worth looking at the industry’s shareholder interests and current valuations first.
Industry outperforms S&P 500 and sector
Zachs Retail – The pharmacy and drugstore industry has outperformed the Zacks S&P 500 Composite and its sectors over the past year. Stocks in the industry fell 6.6% over the period, while the retail and wholesale sector fell 31.6%. The S&P 500 Composite fell 19.8% over the above time frame.
1 year price performance
Industry Current Rating
Based on the 12-month forward price/earnings ratio (P/E) commonly used to value medical stocks, the industry is currently trading at 9.3X compared to 16.01X for the S&P 500 and 20.06X for the sector. I’m here.
As the chart below shows, over the past five years the sector has traded at a high of 12.63x, a low of 7.53x and a median of 10.00x.
Price/earnings ratio 12 months forward (F12M)
Price/earnings ratio 12 months forward (F12M)
3 Retail – focus on pharmacy and drugstore stocks
CVS Health: CVS Health is now heavily involved in an expanded set of digital health services, including antibody and PCR testing, vaccination, and omnichannel pharmacy. CVS.com is one of the top health websites, with over 2 billion visits last year, an increase of nearly 55% year-over-year. CVS Health’s health-related digital capabilities, including COVID testing and vaccines, prescription services, and sales of health and wellness products, have dramatically increased consumer engagement across all his CVS Health businesses.
The Zacks Consensus estimate for 2022 earnings shows a 6.7% rise from 2021. CVS Health, a Zacks rank 3 (hold) stock, is up 3.9% over the past year.
Pricing and Consensus: CVS
walgreens boots: Walgreens Boots continues to transform the way pharmacy business and healthcare is delivered through both physical stores and digital channels. Today, the company’s U.S. retail operations are demonstrating momentum through digital and omnichannel growth with the myWalgreens loyalty program, private-label innovation, and alternative profit streams. In the third quarter of its last reported fiscal year 2022, the company saw an improvement in its online growth momentum, boosting digital sales in the U.S. by 25%. Optimism was permeated by strong performances across health and wellness and personal care categories during the quarter.
The Zachs consensus forecast for revenue for fiscal 2023 shows an increase of 0.01% from fiscal 2022. However, long-term expected revenue growth is pegged at an impressive 5%. Walgreens Boots, ranked No. 3 on Zacks, has fallen 31.9% over the past year.
Price and Consensus: WBA
light aid: Rite Aid continues to strengthen its foothold in mid-market PBMs, innovate across retail and mail-order pharmacy channels, enhance the in-store experience with curated digital offerings, improve product offerings, and launch new logos. The focus is on rebranding the image. Rite Aid previously launched his first three Stores of the Future and successfully completed its acquisition of Bartell. This will facilitate the expansion of our customer base. The company revealed plans to cut costs through closing 145 unprofitable stores, reducing corporate administrative costs, streamlining employee payroll and other store labor costs. It also aims to reduce the costs associated with Elixir due to reduced membership.
The Zachs consensus forecast for fiscal 2024 earnings shows a 95.9% increase from fiscal 2023. Rite Aid, a Zachs rank 3 stock, is down 71.7% over the past year.
Price and Consensus: RAD
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