Still Neutral on Walgreens - Analyst Blog
21 Janvier 2013 - 3:50PM
Zacks
We reiterate our Neutral
recommendation on Walgreens (WAG) following the
first quarter fiscal 2013 results. While the company’s performance
is showing signs of improvement, the current business environment
is tough and keeps us on the sidelines.
Why the
Reiteration?
On Dec 21, 2012, Walgreens reported
adjusted earnings per share of 58 cents for the first quarter of
fiscal 2013, significantly below the Zacks Consensus Estimate as
well as the year-ago mark. Revenues also trailed the Zacks
Consensus Estimate. Despite a lukewarm start to fiscal 2013, things
are looking up with the company turning its fiscal 2012 headwinds
into tailwinds for the ongoing fiscal.
The new contract with
Express Scripts (ESRX) boosts positive sentiment
as traction in prescription sales at Walgreens continues with the
return of customers. The introduction of prescription drugs in the
generic market also supports our non-committal stance. While the
generic wave has dragged sales over the last few quarters, the
company expects the gross margin expansion on account of higher
generic prescription drug sales to continue in the near term.
Notably, the company is undertaking
strategic initiatives to revive growth. The Alliance Boots deal is
expected to be accretive to Walgreens’ results in the future. Its
Balance Reward customer loyalty program is expected to stimulate
customer traffic. We anticipate that these ventures will support
growth going forward. On the other hand, the tussle with players
likes CVS Caremark (CVS) to regain market share is
a cause of concern. Additionally, macroeconomic conditions remain
unyielding.
Following the first-quarter
results, estimate revision trend reflects a divided opinion while
the magnitude of the earnings estimate revision depicts a slightly
positive bias for Walgreens. Accordingly, the stock carries a Zacks
Rank #3 (Hold).
Other Stocks to
Consider
While we remain on the sidelines
for this retail pharmacy chain, we look forward to CVS Caremark and
BioScrip Inc. (BIOS), both carrying a Zacks Rank
#2 (Buy). Rite Aid Corporation (RAD) carries a
Zacks Rank #1 (Strong Buy).
BIOSCRIP INC (BIOS): Free Stock Analysis Report
CVS CAREMARK CP (CVS): Free Stock Analysis Report
EXPRESS SCRIPTS (ESRX): Free Stock Analysis Report
RITE AID CORP (RAD): Free Stock Analysis Report
WALGREEN CO (WAG): Free Stock Analysis Report
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