Stock (Symbol) |
Walgreen’s (WBA) |
Stock Price |
$82 |
Sector |
| Food & Necessities |
Data is as of |
| January 28, 2017 |
Expected to Report |
| Apr 3 – 7 |
Company Description |
 Walgreens Boots Alliance, Inc. (Walgreens Boots Alliance) is a holding company. The Company is a global pharmacy-led, health and wellbeing enterprise. Walgreens Boots Alliance operates through three divisions, including Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale. The Company’s products are marketed under a number of brands, which include No7, the Botanics range, Almus (generic medicines), Boots Pharmaceuticals and Soap & Glory (bathing and beauty brand). In addition, the Company has investments in Guangzhou Pharmaceuticals Corporation and Nanjing Pharmaceutical Company Limited. The Company operates in around 25 countries, which include the wholesale and distribution network with over 340 distribution centers and more than 180,000 pharmacies, health centers and hospitals in 19 countries. Source: Thomson Financial |
Sharek’s Take |
 Walgreen’s Boots Alliance (WBA) is still trying to get the Rite Aid deal done. Walgreen’s has agreed to sell 1200 Rite Aid stores to Freds to get the deal done. WBA management expects $1 billion in synergies from the deal over 3-4 years, but now says it won’t have a material effect on fiscal 2017 profits (year ending Aug 31). Walgreen’s just had profit growth slow to 7% last qtr, and lowered next qtr’s estimate to 4% as well. This company needs to do something to get profit growth back up again. On December 31, 2014 Walgreen’s merged with Alliance Boots, which is made up Boots UK, the UK’s leading pharmacy-led health and beauty retailer, and Alliance Healthcare, the largest pharmaceutical wholesaler in the UK. The deal helped push profit growth higher in 2015 and 2016, but now growth is slowing back down. Walgreen’s is a quality company that buys back stock, makes acquisitions, and pays a 2% dividend. It has a respectable 13% Estimated Long Term Growth Rate, but I don’t see it growing that fast unless it keeps making acquisitions. Sales fell 2% last qtr, and scrutiny over drug prices is affecting the entire drug supply chain. I’m going to sell WBA in the Growth Portfolio, but hold onto it in the Conservative Portfolio. |
One Year Chart |
 This stock is in a long base and I don’t see it breaking out until later in the year. Profit growth just took a big step down. Also, management has lowered the next qtr’s estimate four straight qtrs now. These qtrly profit Estimates of 4%, 12%, 12% and 12% are in question. |
Fair Value |
 My Fair Value on this stock is 18x earnings, which really only gives investors 10% upside (plus the dividends). That’s OK for conservative portfolios, but not growth ones. Profits are expected to climb just 9% this year. |
Bottom Line |
 Walgreens did well when it acquired Boots Alliance, as both profits and the stock made a noticeable move higher. Now WBA is trying to get Rite Aid, which could add $0.50 a year to profits starting in 2018. But right now profit growth is rater tame, and I’m going to sell the stock from the Growth Portfolio to build cash. This stock is still a good selection for the Conservative Growth Portfolio and ranks 10th of 30 stocks in the Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 10 of 30 |
