I'm Reiterating my Buy rating for Walgreen Company (NYSE: WAG), first recommended on February 17, 2009 at a price of $25.46. Walgreen's ambitious cost-containment effort appears to be on-track, but it may be several quarters before earnings per share experience the full benefit of the company's restructuring. Back-store (mostly prescriptions) revenue growth has resumed, which is gratifying; WAG always was a star performer concerning front-store revenue among the drug chains.
To be sure, the recession will hurt front-store revenue, as that sore section contains more discretionary purchases, but provided the cost containment efforts continue to progress, better days remain ahead for Walgreen's shares. The FY2009/FY2010 EPS estimates for WAG are $2.00 to $2.26.
Technically, Walgreen's shares have pulled-back recently: buy this dip; more-cautious investors can wait until WAG closes above the $30 level for three consecutive days,
Stock Analysis: Walgreen is a moderate-risk stock. If you've already purchased WAG's shares, hold them. If not, consider buying a 25% position in WAG now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your WAG position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $17.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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Reader Comments (Page 1 of 1)
9-19-2009 @ 12:50PM
arabhorsesrbest said...
If Walgreen's doesn't start treating Pharmacists andtechnicians better, more rolling "Sick-outs" may happen as did recently in Florida. They are disgusted with the new Central Fill system and being forced to be cashiers and giving flu shots instead of being Pharmacists.