"Shares of Walgreen (NYSE: WAG) have come under pressure in recent months, reflecting a slowdown in sales because of a weakening economy and intensifying competition," notes Richard Moroney.
The editor of Dow Theory Forecasts adds, "However, Walgreen's long-term prospects remain appealing, and the stock is attractively valued. Walgreen is a Long-Term Buy." Here is his review.
"Big, strong, and healthy, Walgreen is the largest U.S. drugstore chain as measured by revenue and the second-largest based on store count.
"The company operates more than 6,200 stores in 48 states and Puerto Rico and plans to boost the count to 7,000 by fiscal 2010 ending August. Walgreen sees long-term potential for about 13,000 U.S. stores. Prescriptions generate about 65% of total sales, with the rest coming from general merchandise.
"In fiscal 2007, both pharmacy and general merchandise sales growth outpaced the industry average, and Walgreen increased market share in nearly all of its core categories.
"Socially Responsible Investing (SRI) is no longer relegated to a tiny corner of the investment landscape; indeed, according to the Social Investment Forum, SRI now accounts for $2.7 trillion, up more than 18% since 2005," says Chuck Carlson.
Here, the editor of The DRIP Investor offers five stock that both rank high for their social responsibility and also stand out based on more traditional earnings and valuation analysis.
"The Social Investment Forum estimates that more than one in every 10 dollars under professional management in the U.S. is involved in SRI investing. What is driving the growth in SRI?
"One factor is the increasing numbers of women and younger investors among the investor populace have fueled demand for SRI investments.
"In addition, we see an increased focus on environment, social, and corporate governance issues. Further, widely publicized stories concerning global warming as well as various corporate governance issues, have caused many investors to reconsider how they deploy their investment capital.
CVS Caremark (NYSE: CVS), a big competitor of both Walgreen (NYSE: WAG) and Rite Aid (NYSE: RAD), released its Q1 earnings last week. They were very good, and they reminded me that I probably need to throw a drugstore chain's stock in my core portfolio as a long-term play on the increasing health-care needs of the baby boomers (and every other demo, for that matter).
Looking through the reported growth rates, you can see that we're talking best-of-breed here. Revenues were up over 60%, and adjusted earnings per share increased over 18%, coming in at $0.55. The Caremark merger has obviously proven to be a good move. Same-store sales rose 3.9%, benefited in part by the early appearance of Easter in March.
According to earnings.com, CVS Caremark basically matched earnings expectations. That's okay, though, I don't think you can hold it against this big brand name. As of this writing, CVS is near a 52-week high. Buying at the 52-week high is always a dicey thing, but if you plan on holding for years, it wouldn't be that much of a concern. Shorter-term traders would need to wait for a pullback. But I like the first quarter results for CVS, and I think the stock is poised to do well over time. And like I said at the beginning, this really may be a stock for the core portion of an individual's investment program -- a true buy-and-hold idea.
Disclosure: I don't own shares in any company mentioned here; positions can change at any time.
This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.
CVS Caremark Corp (NYSE: CVS) -- with 6,200 stores and a pharmacy benefits management division -- beats Walgreen Co. (NYSE: WAG) -- with 5,997 stores -- hands down in the battle of the brands. It's bigger, its earnings are growing faster, it has a higher P/E and its stock has grown faster over the last year and five years. Walgreen wins on one measure: it has a fatter profit margin.
Rite Aid (NYSE: RAD), I should disclose, is one of my least favorite companies and stocks. Nevertheless, I don't mind checking in on it from time to time when there is news about it. Yesterday, the pharmacy released sales data for the month of March (the data excludes the Brooks Eckerd acquisition). Did they change my outlook on Rite Aid at all?
No, although I should say that this wouldn't be necessarily expected; a month of same-store sales data isn't the killer app of an overall investment thesis for a retail idea. Still, shareholders follow comps religiously, and I have to say that Rite Aid's number was nothing to write home about. A 2.6% gain in sales at stores open more than a year is weak. Walgreen (NYSE: WAG) said earlier in the week that its comparable-store revenues grew by a much better 4.4%. Walgreen was able to take advantage of the Easter shopping excitement in a much better fashion than Rite Aid. It all comes down to brand and execution; Walgreen, as well as CVS Caremark (NYSE: CVS), are more valuable in terms of both those attributes.
I may not have been bowled over by Walgreen's recent earnings release, but I can tell you that Rite Aid's share price is downright frightening and telling -- it's telling people to stay away, or at least understand that it may be essentially like buying a lottery ticket (it closed at $2.89 yesterday). Rite Aid's same-store sales were weak, and so is its investment potential.
Disclosure: I don't own shares in any of the companies mentioned here; positions can change at any time.
Luqman Arnold, the former UBS AG (NYSE: UBS) president forced out in 2001, wants the firm to split its investment bank from the private client bank, and look at selling the investment bank and asset management business, according to the Wall Street Journal's "Heard on the Street".
The Financial Times reported that the landmark merger that created Citigroup Incorporated (NYSE: C) was a "mistake" that failed to benefit the financial services giant's investors, customers and employees, said John Reed, who masterminded the $166B deal with Sandy Weill in 1998. Reed, the former head of Citicorp, has advised Citigroup CEO Vikram Pandit at least to consider spin-offs, sources said.
WEB SITES:
Walgreen Co (NYSE: WAG) is branching out by acquiring two companies that provide health-care services, BusinessWeek reported, following in its competitor CVS Caremark Corporation's (NYSE: CVS) shoes. Some investors are wary of Walgreen's move, but Mark Wiltamuth of Morgan Stanley sees it as a new growth avenue and as a push into services complementary to drugstores.
The result? Wall Street is rising, with the Dow industrials climbing over 200 points (211 as I write this). The broader S&P 500 is not shying from the rally either, soaring 1.8%, and the Nasdaq composite is up a cool 2.75%.
It is no surprise then to find that Wal-Mart Stores Inc. (NYSE: WMT) actually set a new 52-week high today, climbing to $54.15 before settling back a bit at $53.76, or 1% higher. While no specific news is driving Wal-Mart at the moment, its stock has seen nice price movement lately, as many have bet the discount retailer would fare well in a slowing economy / recession.
Theflyonthewall.com believes that the breakout is technical, saying that after the $51.50-$52 level served as a "major overhead resistance area for 3 years and was a major support area for the 2 years prior," WMT could break out if it climbed above that level. Not only that, but "breakouts of this type, which have developed over a long period of dull range trading, often produce extreme and persistent movement in the direction of the breakout." Meaning, that if the stock doesn't revert back, we could see WMT shares gain strong upward momentum.
While perhaps not breaching 52-week records, other retailers are performing well today too. Continued falling commodity prices have eased inflation concerns, putting retailers back in favor. Target (NYSE: TGT) shares are climbing nearly 2.5%; Walgreen (NYSE: WAG), which has reported a 5% earnings growth, is seeing its shares rise over 5.3%; and Family Dollar (NYSE: FDO), another discount store, is soaring over 6%.
Leading drug store chain Walgreen Co. (NYSE: WAG) and upscale specialty retailer Tiffany & Co. (NYSE: TIF) are scheduled to report earnings tomorrow. Here's a quick peek at them ahead of results.
Walgreen has beat earnings estimates in four of the past five quarters. When the company reported first-quarter results back in November, earnings came to 46 cents per share, two cents less than the consensus forecast of analysts polled by Thomson Financial, and up from the 43 cents in the same period of the previous year. For the current quarter, analysts expect 67 cents per share, compared to 65 cents in the year-ago quarter.
The company's earnings per share growth forecast for this year is 9.42%, which is better than the industry average but less than the 30.68% of rival CVS Caremark Corp. (NYSE: CVS). The analysts' consensus recommendation is to hold Walgreen, and has been for the past three months. Shares have risen since hitting a 52-week low of $32.50 in January, and closed Friday at $36.78.
For news about Walgreens that could influence the earnings results, see BloggingStocks' Walgreen coverage.
I love going to the drugstore. Whether it's CVS (NYSE: CVS) or my neighborhood Walgreen (NYSE: WAG), I love the convenience of being able to buy everything I need and everything I don't need in one place. I buy lots of Entenmann's donuts, toothpaste, and school supplies at my local store. And now, I may be able to get a flu shot at the store as well.
The New York Times ran an article today entitled "Should Pharmacists Give Flu Shots?" It seems New York City has been suffering from increasingly bad flu seasons. To combat such breakouts, the city is now attempting to pass a bill allowing pharmacists to give flu and pneumonia shots.
The same article quoted the Department of Health as saying that influenza is "now widespread in New York City, with more than 1,000 flu-related visits to emergency rooms each day. Some 20 percent of the current flu vaccine supply is unused."
I feel my local drugstore is competent to sell me nail clippers and gum, but do we really want these stores dispensing medical services?
Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.
Even when the economy struggles, people still need medicine, diapers, personal-care products, and large boxes of candy. This explains the continued sales growth at Walgreen Co. (NYSE: WAG), which saw same-store sales in February jump 8.3%. Strong Valentine's Day sales and a particularly violent flu season helped boost demand at the pharmaceutical retailer.
Excluding the extra shopping day due to Leap Year, same-store sales were up 4.2%. Same-store sales in the chain's pharmacies rose 8.3% and climbed 4.1% excluding February 29. Sales from the pharmacy were modestly impacted by the transition of popular allergy medicine Zyrtec to an over-the-counter version. In turn, the appearance of Zyrtec on the regular shelves positively impacted general-merchandise (or front-end) sales, which rose 8.2% in February, or 4.6% excluding the extra shopping day.
The impact of these sales on the bottom line will be more apparent late this month; WAG is currently scheduled to report its quarterly earnings results on March 24. According to First Call estimates, Wall Street is expecting per-share results of 67 cents, or two pennies better than year-ago figures.
In late-morning trading, WAG shares have risen 0.8%. The shares have shown recent strength, tacking on nearly 13% since their late-January nadir.
Citigroup upgraded Moody's (NYSE: MCO) to "buy" saying "the company's earnings outlook is favorable," according to MarketWatch.
Bear Stearns upgraded Coca-Cola (NYSE: KO) to "outperform" from "peer perform," according toBriefing.com. The news service also reports that Merriman downgraded Level 3 (NASDAQ: LVLT) to "neutral" from "buy."
MOST NOTEWORTHY: Shire Plc, Bank of Ireland and Walgreen were today's noteworthy downgrades:
Bernstein downgraded shares of Shire Plc (NASDAQ: SHPGY) to Underperform from Market Perform as they believe sales of hyperactivity drug Vyvanse will be lower than expected.
Bank of Ireland (NYSE: IRE) was downgraded to Neutral from Buy at UBS on the slowing economy and commercial property market.
Citigroup downgraded Walgreen (NYSE: WAG) to Sell from Hold as they believe the weaker consumer environment should magnify company-specific challenges and that earnings pressure will continue over the next few quarters.
OTHER DOWNGRADES:
Raven (NASDAQ: RAVN) Industries was lowered to Sell from Neutral at Piper.
Goldman downgraded Brown-Forman (NYSE: BF.A) to Sell from Neutral.
JP Morgan downgraded Noble (NYSE: NE) to Neutral from Overweight.
Verizon Communications Inc. (NYSE: VZ) said fourth-quarter profit rose 3.9% as wireless and television subscriptions increased. Net income climbed to $1.07 billion, or 37 cents a share. Profit excluding some items was 62 cents, meeting the average estimate of 21 analysts in the Bloomberg survey. Sales rose 5.5% to $23.8 billion, missing the $24 billion average estimate of analysts in a Bloomberg survey.
Oilfield services provider Halliburton Co. (NYSE: HAL) said Monday its fourth-quarter profit rose almost 5% from a year ago, helped by growing business in the Eastern Hemisphere, where the company is placing greater resources. Net income rose to $690 million, or 75 cents per share topping analysts estimate of 69 cents a share. Halliburton's quarterly revenue rose 19% to $4.2 billion, topping analysts' estimates of $4.1 billion. Shares are climbing over 1.6% in premarket trading.
Kellogg (NYSE: K) and General Mills (NYSE: GIS) were each upgraded to Buy from Hold at Citigroup with the broker claiming that not only is there little correlation between U.S. food consumption and GDP growth, but a recession may even help these firms, as consumers eat in more.
Caterpillar (NYSE: CAT) was upgraded to Outperform from Peer Perform at Bear Stearns. In this case, the broker hopes for an economic rebound in 2009 when construction equipment sale should "begin to recover."
CVS Caremark
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