Stock (Symbol) |
Walgreen’s (WBA) |
Stock Price |
$83 |
Sector |
| Food & Necessities |
Data is as of |
| November 19, 2016 |
Expected to Report |
| Jan 5 – 9 |
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 |
 Walgreens Boots Alliance (WBA) is all ready to break out to new highs, but might not have the power to with profit growth expected to slow. WBA just closed its 2015 fiscal year with 16% profit growth (fueled by Boots Alliance) but is expected to have 8% profit growth this fiscal year. 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 influx of new management has transformed Walgreen’s to a leaner, more efficient machine with improved merchandising. WBA has beaten the street the last 4 qtrs and will have to continue to do so to keep the momentum going. Profits are expected to grow 8% in each of the next 2 qtrs, and with a P/E of 17 I think WBA needs to come in with teens profit growth for the stock to break out and move higher. Still, at $83 the stock is at the top of its trading range and could break out anytime. Walgreen’s did negotiate a deal to take 40 million prescriptions from competitor CVS Caremark, but there’s a question to whether this business will be high margin or low margin. The company is also trying to buy Rite Aid, which would help make the company bigger but hurt stock buybacks, so it doesn’t matter to me either way. This is a safe stock with a 2% yield and its dividend has increased every year since 1976. But the Est LTG of 12% a year might be too optimistic. Overall this is a solid selection for conservative accounts, but I may sell it from growth accounts in the near future. |
One Year Chart |
 Nice looking chart. The extra scripts WBA got from CVS might be the catalyst to make the stock breakout. We will have to see if this boosts profits beyond expectations. Still, from management’s comments I think the company will continue to beat anyway. Last qtr WBA had 22% profit growth, beat the 13% estimate, but had 0% sales growth. Estimates didn’t change materially, and profit growth is expected to be 8%, 8%, 11% and 8% the next 4 qtrs. |
Fair Value |
 My Fair Value on this stock is 18x earnings, down from 19x last qtr because growth is set to slow and there’s a lot of negativity in the drug space right now. Maybe 10% total return in the coming year if my numbers work out, which really isn’t a lot for growth investors. |
Bottom Line |
 Walgreens Boots Alliance is a quality company that buys back stock, makes acquisitions, and pays a dividend. I’m concerned growth may slow from the 16% delivered last year, but the 40 million new scripts might boost profits beyond expectations. The stock is poised to breakout, but I don’t know if it can with profits set to slow to 8% in the coming qtrs. WBA ranks 22nd of 29 stocks in the Conservative Growth Portfolio Power Rankings and 33rd of 34 stocks in the Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
33 of 34Aggressive Growth Portfolio N/AConservative Stock Portfolio 22 of 29 |
