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Walgreen Boots Hopeful on Rite Aid Buyout amid Margin Woes
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On Jun 22, 2016, we issued an updated research report on Walgreens Boots Alliance, Inc. (WBA - Free Report) – the world’s first pharmacy-led, health and well-being enterprise. The company includes the largest global pharmaceutical wholesaler and distribution network with over 350 distribution centers in 19 countries.
Of late, Walgreens Boots (formed through the combination of the legacy Walgreens and Alliance Boots in Dec 2014) has been making healthy progress in its operations, as is evident from its second-quarter fiscal 2016 results. Post merger till now, Walgreens Boots’ focus remains on generating cash through working capital efficiencies, particularly in the U.S.
Post merger, Walgreens Boots has implemented strong operational governance procedures to improve capital and invest in the right growth initiatives to generate healthy returns for shareholders.
Currently, the company is focused on the proposed takeover of the U.S. retail pharmacy chain – Rite Aid – for $17.2 billion. This mega acquisition will allow Walgreens Boots to further expand its business realm in the U.S. in the long term, where it already enjoys the position of the largest retail drug store giant.
The transaction, expected to close in the second half of calendar year 2016, should be accretive to Walgreens Boots’ adjusted earnings per share in its first full year after completion. Rite Aid’s shareholders approved the transaction on Feb 4, 2016, after the FTC (Federal Trade Commission) asked for a second request from both the companies. Post the approval, the acquisition procedure is progressing at a healthy pace, per Walgreens Boots’ management.
On the flip side, a slowdown in generic introduction has been affecting the company’s margins over the past few years. The company also faces a tough competitive landscape in the industries where it operates, along with macroeconomic challenges, which tend to hike its expenses.
Moreover, a shift in the mix of pharmacy prescription volume toward programs offering lower reimbursement rates might adversely affect Walgreens Boots’ results of operations. Evidently, the company’s Retail Pharmacy USA division continued to experience a shift in pharmacy mix toward 90-day at retail in fiscal 2015 and the trend is expected to continue in fiscal 2016 as well.
Walgreens Boots currently carries a Zacks Rank #3 (Hold).
Key Picks in the Sector
Some better-ranked stocks in the medical sector are St. Jude Medical Inc. , NuVasive, Inc. and LeMaitre Vascular, Inc. (LMAT - Free Report) . All the three stocks hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Walgreen Boots Hopeful on Rite Aid Buyout amid Margin Woes
On Jun 22, 2016, we issued an updated research report on Walgreens Boots Alliance, Inc. (WBA - Free Report) – the world’s first pharmacy-led, health and well-being enterprise. The company includes the largest global pharmaceutical wholesaler and distribution network with over 350 distribution centers in 19 countries.
Of late, Walgreens Boots (formed through the combination of the legacy Walgreens and Alliance Boots in Dec 2014) has been making healthy progress in its operations, as is evident from its second-quarter fiscal 2016 results. Post merger till now, Walgreens Boots’ focus remains on generating cash through working capital efficiencies, particularly in the U.S.
Post merger, Walgreens Boots has implemented strong operational governance procedures to improve capital and invest in the right growth initiatives to generate healthy returns for shareholders.
Currently, the company is focused on the proposed takeover of the U.S. retail pharmacy chain – Rite Aid – for $17.2 billion. This mega acquisition will allow Walgreens Boots to further expand its business realm in the U.S. in the long term, where it already enjoys the position of the largest retail drug store giant.
The transaction, expected to close in the second half of calendar year 2016, should be accretive to Walgreens Boots’ adjusted earnings per share in its first full year after completion. Rite Aid’s shareholders approved the transaction on Feb 4, 2016, after the FTC (Federal Trade Commission) asked for a second request from both the companies. Post the approval, the acquisition procedure is progressing at a healthy pace, per Walgreens Boots’ management.
On the flip side, a slowdown in generic introduction has been affecting the company’s margins over the past few years. The company also faces a tough competitive landscape in the industries where it operates, along with macroeconomic challenges, which tend to hike its expenses.
Moreover, a shift in the mix of pharmacy prescription volume toward programs offering lower reimbursement rates might adversely affect Walgreens Boots’ results of operations. Evidently, the company’s Retail Pharmacy USA division continued to experience a shift in pharmacy mix toward 90-day at retail in fiscal 2015 and the trend is expected to continue in fiscal 2016 as well.
Walgreens Boots currently carries a Zacks Rank #3 (Hold).
Key Picks in the Sector
Some better-ranked stocks in the medical sector are St. Jude Medical Inc. , NuVasive, Inc. and LeMaitre Vascular, Inc. (LMAT - Free Report) . All the three stocks hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>