Rite Aid-Walgreens Deal Resolution Produces A Winner: Core-Mark

After speaking with the CFO of Core-Mark Holding Company, Inc. CORE, Loop Capital Markets analyst Andrew Wolf is increasingly confident that it's still a good buy.

Wolf reiterated a Buy rating and $40 price target on shares, a 27 percent upside from Friday’s opening price.

While sales in the convenience store industry weakened in June, the company’s management reported that March through May comps with its customer base were positive and outperforming the industry’s growth rate.

“We have no reason to believe that is not still likely the case,” said Wolf in a note.

Core-Mark is also noted to be one of a few companies in the food retail industry least exposed to the risk of Amazon.com, Inc. AMZN buying one of its competitors, following its acquisition of Whole Foods Market, Inc. WFM.

New Rite Aid Deal Is A Plus For Core-Mark

Rite Aid Corporation RAD and Walgreens Boots Alliance Inc WBA announced on June 29 that the former will sell only half of its stores to the latter, rather than a full acquisition.

Rite Aid, which is a major customer of Core-Mark, was hit hard, but Wolf believes the deal will prove to benefit Core-Mark.

With a deal finalized, Rite Aid is now more able to focus on renewing its contract with Core-Mark, which lapsed in April.

Wolf also said the Rite Aid—Walgreens deal buys Core-Mark more time to work on the contract.

It's unlikely it will not be renewed. Core-Mark’s delivery of perishable drinks and other products is economically positive for Rite Aid, and helps to preserve the profitability of all its stores including those being sold.

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