Though the quarter is winding down, there are still earnings reports to come, including Walgreen Co. (NYSE: WAG) and Kroger Co. (NYSE: KR). Both companies are expected to report profit growth this coming week.
Walgreen is expected by analysts surveyed by Thomson Financial to report third-quarter earnings of 59 cents per share, up 6.8% from the same period of last year, on revenue of $15.1 billion. The company has provided positive surprises in four of the past five quarters -- by two cents in the previous quarter.
Based in Deerfield, Ill., Walgreen is the largest drug store chain in the U.S. in terms of sales, and has more than 6,200 stores in the U.S. and Puerto Rico. In the past year, the company's revenues were $53.7 billion and its net income totaled $2.0 billion. Its long-term EPS growth forecast is 14.0%, which is less than the retail industry average, as well as less than that of rival CVS Caremark (NYSE: CVS). The consensus recommendation of analysts has recently shifted from hold to buy Walgreen.
The share price is up 4.0% since the beginning of the year, and up from 11.6% from a year ago. It trades at a P/E ratio of 20.68. Shares closed Friday at $41.35.
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.
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.
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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.
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.
Walgreen Co. (NYSE: WAG) is trading down around 14% as of this morning after the drug retailer announced that its fourth quarter net income fell to $396.5 million ($0.40 per share) from $412.3 million ($0.41 per share) in the year ago period. Although net sales rose to $13.42 billion from $12.17 billion, the profit shortfall is being placed squarely on lower generic drug reimbursements and higher employee costs and expenses.
Is Walgreen's feeling the heat from the $4 generic prescription drug program announced by Wal-Mart (NYSE: WMT) just over a year ago? It could certainly be seen that way. Same-store sales did increase by 6.3% during the quarter, so although Walgreen's saw increases in terms of sales and revenues, the chain apparently failed to keep its expenses down during the same time. Couple that with the generic drug situation that's still in flux and you have a down quarter. Or, at least that is the way the market is interpreting the numbers as WAG shares are spiking down big-time this morning.
Walgreen's Chairman Jeffrey Rein stated that "Our expenses weren't in line with the level of reimbursements we were receiving. Managing both expenses and lower reimbursements on some generic drugs is my top priority." Seems reasonable, although it's been a while since the generic price cuts seen around the industry started happening. Although Walgreen's sees $2 billion in capital investments in fiscal 2008, the cost situation seems to be a tad out of hand at this time without even considering the capital improvements soon to come.
Walgreen Co. (NYSE:WAG) opened at $44.28. So far today the stock has hit a low of $44.24 and a high of $45.05. As of 1:00 this afternoon, WAG is trading at 44.10, down 0.04 (-0.1%), well off its morning highs.
After hitting a one year high of 51.60 in September, the stock dropped sharply and has since seen resistance around 47. Tensions over the deal between CVS (NYSE:CVS) and Caremark (NYSE:CMX) wreaked havoc on drug store stocks yesterday, including a big dip in WAG stock yesterday afternoon. Most of these stocks bounced back earlier today but are now sliding with the rest of the market, with the CVS/CMX vote scheduled for tomorrow. The technical indicators for WAG have been bearish and steady, while S&P gives the stock positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $37.50 range. WAG hasn't been below 39.50 at all in the past year, and has shown support around 40. This trade could be risky depending on how the CVS-CMX deal turns out, but the strong support for WAG around 40 could protect this position.
Brent Archer is an options analyst and writer at Investors Observer. (Free Subscription)
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about.
The Walgreen Company (NYSE: WAG) was hit with some disappointing news yesterday from the Equal Employment Opportunity Commission. The agency decided to file a class action lawsuit of discrimination based on a 2005 lawsuit brought against the company.
According to an article in today's New York Times, some black employees felt that they were discriminated upon based on their race when the company handed out job assignments. Walgreen has been denying the charges which some officials in the E.E.O.C. have described as the biggest discrimination suit in the past few years.
In the lawsuit both current and former Walgreen employees have accused the company of some pretty serious charges. They claim that Walgreen based job assignments on race and went a step further to geographically locate some black employees in predominantly black neighborhoods or less-desirable ones.
One lawyer from the E.E.O.C. stated that after reviewing some of the case details he determined that Walgreen's had frequently assigned black managers to poorer performing stores and thus limiting their chances of getting coveted job promotions. He also went on to say that black managers were paid less than white employees holding the same positions.
There have been no monetary amounts set forth in the suit as of yet, but the E.E.O.C. laid out their goals in an official statement that they would be seeking monetary damages as well as changes in the overall company policy.
Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer.
You think you've seen it all when you hear of customers battling in the aisles of Wal-Mart and Best Buy for Elmo dolls and gaming systems -- just to make sure their kids are not disappointed when gift-opening time comes. While this smacks of unhealthy materialism in many ways, it's the possessive nature of the retail beast come December across this great country of ours.
But when customers start setting things on fire inside a retail store due to a disagreement, odd behavior has reached a new level. This is exactly what happened inside a Walgreens store in Tampa Bay, Florida, as a female customer was apparently not happy with the outcome of a confrontation with a store employee about her change from a purchase.
Solution? Why, set something on fire, of course. Although the customer ended up realizing that she had in fact been given the correct amount of change by the clerk, it was not before the customer walked over to the display of stuffed toys where she had grabbed her purchase previously -- and she set the display on fire. Hmmm. Why do antics like this always seem to happen in Florida?
With Wal-Mart's recent $4 generic drug program apparently not hurting rival drugstore chains, yet, will 2007 hold a different tune for the world's largest retailer?
It is my belief that Wal-Mart's sole goal in lowering the price of over 300 generic drugs to $4 was to drive foot traffic into its stores to fuel sales -- any sales. Wal-Mart needs the boost, as recent same-store sales have been a bust and investors are becoming impatient. Wow -- big surprise!
But, with specialty drug chains like Walgreens and CVS offering more than Wal-Mart can -- mainly, a non-manic shopping experience in many cases, will Wal-Mart's effort hurt these chains? If so, it could be a slim erosion of lower-income shoppers who may -- if not already -- be shopping at Wal-Mart for prescription drugs.
Since the specialty drug chains can't lower their generic drug prices to compete with Wal-Mart, and with profit margins surprisingly surging recently, 2007 should be an interesting year in the drug retailing biz.
Walgreen (NYSE:WAG) and Rite Aid (NYSERAD) both turned in excellent results for the last quarter. Part of the message sent by both companies is that Wal-Mart Stores, Inc. (NYSE:WMT) $4 generic drug program is not hurting them. But Wal-Mart said its November pharmacy sales were up sharply.
Some part of this does not make sense. Some analysts say that the Wal-Mart drug buyers as consumers without insurance who were not going to any store while the mainstream pharmacies cater to patients who are insured. Rite Aid and its large competitors keep more generic drugs stocked in its stores, and their prices are not very different from Wal-Mart's.
If there is a surge in the purchase of generic drugs that is fueling growth at both Wal-Mart and Walgreen, that would be a problem to Big Pharma companies whose patent drug sales are being eroded by generics already.
Again, that answer would be too simple. Some data still appears to be missing.
While the mystery of both Wal-Mart and Walgreen both doing well is still open, one piece of data does appear to be clear. CostCo took a shot at $4 generics and lost money. They moved the price point to $10.
Lost money? Can Wal-Mart be making any at $4? If not, one of Wal-Mart's biggest initiatives could be a bust.
Douglas A. McIntyre is a partner at 24/7 Wall Street.
The nationwide recall on 11 million bottles of the over-the-counter pain reliever acetaminophen announced yesterday, has wrapped up mass merchandise and drug retailers in its wrath, including Walgreens Co. (NYSE:WAG), CVS Corp. (NYSE:CVS) drugstores and global retailer Wal-Mart, Inc. (NYSE:WMT) as well. The recall extended to dozens of generic and store-brand versions of acetaminophen. In other words, what a mess -- as there is no single brand to focus on here.
The offending acetaminophen bottles contain caplets that are thought to possibly contain microscopic pieces of metal and metal shavings that may have been introduced during the manufacturing process, according to reports.
To make matters worse, the acetaminophen caplets were made and sold in over 100 store brand variations, which makes the recall a logistics nightmare, I would suppose. In other words, almost every generic and store-brand acetaminophen bottled product was pulled off Wal-Mart shelves yesterday in response to the recall, which was issued by private-label manufacturer Perrigo and the FDA in a joint release.
Several large retailers are involved in a recall of around 11 million bottles of acetaminophen after Perrigo Co. (NASDAQ: PRGO) announced they had found metal fragments in some of their bottles. So far no injuries have been reported.
After scanning 70 million caplets with a metal detector, the company discovered the metal in about 200. When I first read this story and saw the word fragments I for some reason had the mental image of some metal scrapings having been detected, but according to the FDA the "fragments" ranged in size from "microdots" to wire one-third of an inch long. That's quite a fragment indeed.
Among the companies likely to be involved in the recall are Wal-Mart Stores, Inc. (NYSE:WMT), CVS Corp. (NYSE:CVS), Walgreen Co. (NYSE:WAG) and Costco Wholesale Corp. (NASDAQ:COST), but a formal list has not been released. The company said that 383 batches were effected as a result of raw material purchased from a third-party supplier. The company's website must be getting nailed today, I have tried repeatedly to see if I could find anything else out by looking over their site, but server overload seems to have shut them down for the time being.
Since the potential consequences of ingesting the metal fragments is presumed to be temporary the recall is being done on a voluntary basis, but I think you can be pretty sure no store wants to wind up with the public relation nightmare of selling contaminated medicine that they knew in advance had risks involved. According to the FDA, should you consume a contaminated pill you could encounter minor stomach discomfort or possible cuts to the mouth and throat.
Shares of PRGO haven't been hit too hard today in light of this recall, with the stock selling off 3.4% to $17.39 down $0.62.
U.S. stocks sold off today on fears economic growth will slow in the spring of 2007 resulting in weaker corporate earnings per share.
CVS Corporation (CVS) and Caremark Rx, Inc. (CMX) confirmed a merger of equals. Caremark shareholders will receive 1.67 shares of CVS Corporation for each share of Caremark. Both companies option volume was heavy as arbitrageurs, speculators and hedgers adjusted their positions. Both companies option trading implied volatility migrated to 29, near the 26-week average for both CVS Corporation and Caremark. Walgreen's (WAG) and Express Scripts (ESRX) both sold off on the uncertainty of how Caremark and CVS Corporation's new business model will change the prescription market.
The S&P 500 is down .81%, NASDAQ 100 is down 1.45%, The Dow is down 54% and the 10 year bond rate declined to 4.560%. The CBOE VIX was up .44 to 11.54.
The Canadian government indicted it plans to introduce a tax next year on distributions paid by trusts. Canadian energy trusts sold off. Canetic Res Trust (CNE) was down 2.93 to $14.79 and Canetic Res Trust's December option implied that volatility rose to 39 from 27.
Enerplus Resources (ERF) was down 8.14 to $45.16 and it's December option implied that volatility rose to 32 from 23.
Harvest Energy Trust (HTE) was down 4.33 to $25.03 and it's December option implied that volatility rose to 38 from 22 according to Track Data.
Option volume leaders today were Garmin Ltd. (GRMN), Apple Computer, Inc (AAPL), Newmont Mining Corporation (NEM), CVS Corporation (CVS), Qualcomm, Inc. (QCOM) and Dell, Inc. (DELL).
Options Update is provided by Paul Foster and TheFlyOnTheWall.com (subscription required).
Wal-Mart Stores, Inc. (NYSE: WMT) shares closed up to end the trading week at $48.46, an increase of $0.14 and 0.29% from Thursday's close. WMT shares were mixed in trading this week with some barely-registered moves in day-to-day trading as the shares retreated from the magical $50 share price amount that is ore of a psychological high-water mark than anything.
This week saw some interesting developments in Wal-Mart land, as the retailer's strategy to unleash its much-cheaper prescription drug plan to the entire state of Florida as well as start it immediately instead of in 2007 caused grocery retailer Publix to make a similar announcement on the heels of Target's announcement that it too would follow Wal-Mart's lead.
But, the issue of non-paid worktime from current and former employees came crumbling down on Wal-Mart as well, as Thursday's decision from a Pennsylvania judge may cause a judgment in the amount of over $60 million for the retailer, as there are 167,000 current and former employees carried by the class-action suit.
With Wal-Mart Stores Inc. (NYSE: WMT) and Target Corp (NYSE: TGT) set to challenge the traditional drug store chains as they lower prices on prescription generic drug, what is in store for national chains like CVS Corp (NYSE: CVS) and Walgreens? You'd never know that CVS feels threatened, yet, especially after the retailer reported rising sales for the September same-store sales period.
No surprise, since the full effect of Wal-Mart's massive move, which is only available in Florida for now, has not yet shaken up the retail drug industry. Add Target into that mix, and by this time next year, the heat may indeed be on, having a large impact on CVS and Rite-Aid among other. Rite-Aid is also in the midst of buying national drug retailer Brooks Drugstores from Canada's Jean Coutu.
CVS increased its third-quarter EPS guidance range to 31 to 33 cents from a previous range of 28 to 30 cents -- but a few more quarters of upped guidance may be all that's left in store for CVS and other retailers as they start feeling the heat of Wal-Mart and Target. Will they match the new 40% discounts on over 300 generic prescription drugs in an attempt to keep customers? If not, what do you think -- will Rite-Aid, CVS and Walgreens have a rosy or dark 2007?
Walgreen is expected by analysts surveyed by Thomson Financial to report third-quarter earnings of 59 cents per share, up 6.8% from the same period of last year, on revenue of $15.1 billion. The company has provided positive surprises in four of the past five quarters -- by two cents in the previous quarter.
This post is part of our 
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You think you've seen it all when you hear of customers battling in the aisles of Wal-Mart and Best Buy for Elmo dolls and gaming systems -- just to make sure their kids are not disappointed when gift-opening time comes. While this smacks of unhealthy materialism in many ways, it's the possessive nature of the retail beast come December across this great country of ours.
With Wal-Mart's recent $4 generic drug program apparently 
The 
Several large retailers are involved in a recall of around 11 million bottles of acetaminophen after Perrigo Co. (NASDAQ: PRGO) announced they had 
U.S. stocks sold off today on fears economic growth will slow in the spring of 2007 resulting in weaker corporate earnings per share.
Wal-Mart Stores, Inc. (NYSE: WMT) shares closed up to end the trading week at $48.46, an increase of $0.14 and 0.29% from Thursday's close. WMT shares were mixed in trading this week with some barely-registered moves in day-to-day trading as the shares retreated from the magical $50 share price amount that is ore of a psychological high-water mark than anything.
With Wal-Mart Stores Inc. (NYSE: WMT) and Target Corp (NYSE: TGT) set to challenge the traditional drug store chains as they lower prices on prescription generic drug, what is in store for national chains like CVS Corp (NYSE: CVS) and Walgreens? You'd never know that CVS feels threatened, yet, especially after the retailer 
John McCain, losing ground, goes for broke tonight
If nothing else, gasoline prices are falling!
Closing Bell: Dow slump puts bulls on suicide watch; BAC, MS, F, FSLR all down, AMD up
