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Walgreen Boots: Mixed Q4, Awaits Rite Aid Deal Closure
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On Nov 25, 2016, we issued an updated research report on Deerfield, IL-based Walgreens Boots Alliance, Inc. (WBA - Free Report) , which is the world’s first pharmacy-led, health and wellbeing enterprise. The company currently carries a Zacks Rank #3 (Hold).
Walgreens Boots reported mixed fourth-quarter fiscal 2016 results, with earnings comfortably beating the Zacks Consensus Estimate while revenues fell just shy of the mark. The postponement of the proposed Rite Aid buyout in relation to some required divestments at Walgreens and Rite Aid stores also adds to concerns.
However, the company’s share price movement has remained robust since the last earnings release. Walgreens gained 2.05% over the past one month, a significant outperformance compared to the industry growth rate of -4.6%.
Nonetheless, we are currently looking forward to the closure of the deal as the combination of these two retail giants will allow Walgreens Boots to further expand its business realm in the U.S. − where it already enjoys the position of the largest retail drug store giant − in the long term.
Management expects this buyout to accelerate Walgreens Boots’ strategy by completing its network; providing a larger and more comprehensive portfolio, with which it will deploy additional knowledge and skill; creating a more comprehensive and strong platform for the development of the company’s brand presence and overall future growth of its business.
We also note that so far, the strategic combination of Walgreens and Alliance Boots which formed Walgreens Boots, has made healthy progress in its operations, as evident from the strong fiscal fourth-quarter results. Comparable pharmacy sales were up 0.6% at Boots UK.
Earlier, Walgreens Boots witnessed considerable progress in driving sales of its No7 beauty brand, acquired through the Alliance Boots deal. In this regard, the company is on track to expand its differentiated beauty product offering to an additional 1800 stores. This will increase the total number of stores with its beauty product offerings to approximately 2000 by the end of calendar year 2016.
The company’s strong cash balance position and progress of its cost-cutting initiatives further boost our confidence in the stock.
On the flip side, fewer generic drug introductions and the ongoing generic drug inflation have been hindering Walgreens Boots’ pharmacy margin. In the fiscal fourth quarter as well, the company’s pharmacy gross margin figures contracted, in line with management’s expectation due to ongoing reimbursement pressure and changes in mix.
Stocks to Consider
Better-ranked stocks in the broader healthcare sector are NxStage Medical Inc. , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation . NxStage Medical and Baxter International sport a Zacks Rank #1 (Strong Buy), while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NxStage Medical surged 32.2% in the last one year compared to the S&P 500’s 5.9% over the same period. The company has a four-quarter average positive earnings surprise of 46.25%.
Baxter International rallied 23.9% over one year, much higher than the S&P 500’s 5.9%. It has a trailing four-quarter average positive earnings surprise of 27.02%.
Bovie Medical recorded a 119.39% gain in the past one year, way better than the S&P 500’s 5.9%. The company has a trailing four-quarter average positive earnings surprise of 28.69%.
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Walgreen Boots: Mixed Q4, Awaits Rite Aid Deal Closure
On Nov 25, 2016, we issued an updated research report on Deerfield, IL-based Walgreens Boots Alliance, Inc. (WBA - Free Report) , which is the world’s first pharmacy-led, health and wellbeing enterprise. The company currently carries a Zacks Rank #3 (Hold).
Walgreens Boots reported mixed fourth-quarter fiscal 2016 results, with earnings comfortably beating the Zacks Consensus Estimate while revenues fell just shy of the mark. The postponement of the proposed Rite Aid buyout in relation to some required divestments at Walgreens and Rite Aid stores also adds to concerns.
However, the company’s share price movement has remained robust since the last earnings release. Walgreens gained 2.05% over the past one month, a significant outperformance compared to the industry growth rate of -4.6%.
Nonetheless, we are currently looking forward to the closure of the deal as the combination of these two retail giants will allow Walgreens Boots to further expand its business realm in the U.S. − where it already enjoys the position of the largest retail drug store giant − in the long term.
Management expects this buyout to accelerate Walgreens Boots’ strategy by completing its network; providing a larger and more comprehensive portfolio, with which it will deploy additional knowledge and skill; creating a more comprehensive and strong platform for the development of the company’s brand presence and overall future growth of its business.
We also note that so far, the strategic combination of Walgreens and Alliance Boots which formed Walgreens Boots, has made healthy progress in its operations, as evident from the strong fiscal fourth-quarter results. Comparable pharmacy sales were up 0.6% at Boots UK.
Earlier, Walgreens Boots witnessed considerable progress in driving sales of its No7 beauty brand, acquired through the Alliance Boots deal. In this regard, the company is on track to expand its differentiated beauty product offering to an additional 1800 stores. This will increase the total number of stores with its beauty product offerings to approximately 2000 by the end of calendar year 2016.
The company’s strong cash balance position and progress of its cost-cutting initiatives further boost our confidence in the stock.
On the flip side, fewer generic drug introductions and the ongoing generic drug inflation have been hindering Walgreens Boots’ pharmacy margin. In the fiscal fourth quarter as well, the company’s pharmacy gross margin figures contracted, in line with management’s expectation due to ongoing reimbursement pressure and changes in mix.
Stocks to Consider
Better-ranked stocks in the broader healthcare sector are NxStage Medical Inc. , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation . NxStage Medical and Baxter International sport a Zacks Rank #1 (Strong Buy), while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NxStage Medical surged 32.2% in the last one year compared to the S&P 500’s 5.9% over the same period. The company has a four-quarter average positive earnings surprise of 46.25%.
Baxter International rallied 23.9% over one year, much higher than the S&P 500’s 5.9%. It has a trailing four-quarter average positive earnings surprise of 27.02%.
Bovie Medical recorded a 119.39% gain in the past one year, way better than the S&P 500’s 5.9%. The company has a trailing four-quarter average positive earnings surprise of 28.69%.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>