Rite Aid Earnings Overtake Deal Hopes

NEW YORK (TheStreet) -- Rite Aid(RAD) , the debt-laden drug store giant that reported a $500 million-plus annual loss is a "Buy" even if the company can't attract a buyer like Walgreen(WAG) , according to a Guggenheim Partners analysis that cuts against speculation of a possible merger.

On Thursday, Guggenheim Partners analyst John Heinbockel raised his price target on the Camp Mill, Pa-based drug store giant to $2.25 a share from $1.60 on a boost in expected earnings at the company's stores. That earnings-based price target lift comes as the company's shares have surged nearly 60% in 2012 driven, by M&A rumors.

"Our optimism stems entirely from fundamentals and not from potential M&A. In our view, a strategic transaction is highly unlikely," notes Heinbockel in a March 15 research note. "This largely reflects the absence of logical buyers at acceptable prices. We find it difficult to make the case that Walgreen should spend $8.0B or more to acquire Rite Aid."

In November, Susquehanna Financial Group analyst Joseph Stauff wrote in a note to clients that the company could be a target of Walgreen, the largest U.S. drugstore chain. With Rite Aid, Walgreen would further bolster its near 30% market share, distancing it from CVS Caremark(CVS) , the industry second.