Walgreen’s Company (NYSE:WAG) Earnings Analysis

Posted by Lynn Eisler September 30, 2013 0 Comment 1999 views

Walgreen Company (NYSE:WAG), one of the largest drugstore chain in America, said the company will announce its fourth quarter results for fiscal year 2013 on October 1, 2013. Walgreen Company (NYSE:WAG) in its press release said that Sales for the fourth quarter ending August 3, 2013 increased 5.1% to $17.95 billion, from $17.07 billion in the same quarter last year.

For the quarter, comparable stores sales rose 4.5%, front-end comparable store sales increased 1.7%, prescriptions filled at comparable stores rose 6.8%, and also comparable pharmacy sales were up 6.2% in comparison to the same quarter last year.

According to Walgreen Company (NYSE:WAG), the total sales for FY2013 were up 0.8% to $72.22 billion, from $71.63 billion in fiscal 2012. With this kind of result, expectations are high for the year-end results on October 1.

The company said it opened 14 stores during the month of August, which also includes re-locations of two stores. Total number of stores it operated was 8,585 in all 50 states, as on August 31.

Walgreen Company (NYSE:WAG), is one of the largest drugstore chain in America, which offers over six million customers multichannel access to consumer goods and services, pharmacy, health and services across the nation. With sales of $72 billion in fiscal 2012, Walgreen offers products and services through retail outlets, as well as through mail, telephone and more. On August 2, 2012, the company bought 45% stake in Alliance Boots GmbH, while in September last year, it purchased a regional drugstore chain in the mid-South region of the US. WP Carey & Co LLC, in September 2012, bought five retail stores leased to Walgreen.

On Walgreen’s outlook, CMI Research in its Seeking Alpha article wrote:

“WAG’s last five fiscal years EPS are 2.17, 2.02, 2.12, 2.94, and 2.42, which is a growth 2.02% CAGR. EPS in the third quarter have also increased by 5% compared to same quarter last year.

What is of more importance to the growth of revenues is that the dispute between Walgreen and Express Script is over and, with the new deal between the two companies (signed September 2012), new customers are guaranteed to Walgreen. Moreover, the projected growth of 5.3% in U.S. prescription revenue in 2014 and 2015 provides a solid backdrop that revenues of WAG are going to grow in the coming years.

With the current strong and stable financial results of the company, its superior operational performance in regards to its competitors, and its sound financial position; Walgreen is worth considering for a deeper analysis. From this brief first look, the company seems well positioned for future share price growth.

The Affordable Care Act expanding insurance to millions of Americans, and the projected growth of prescription revenue in U.S. would suggest continued future growth for the company. Moreover, with 8,585 stores across the U.S., Puerto Rico and Guam, the company is well positioned to capture any upside in the industry.

Based on our brief fundamental analysis, WAG appears to be currently trading lower than its intrinsic value, suggesting that the company is potentially undervalued by a significant percentage. A deeper company analysis, complete with a DCF valuation, may be in order following the October 1 announcement.”

About Lynn Eisler

Lynn Eisler is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments. Lynn has been honored with the H.L. Mencken Award for Investigative Reporting, the Champion of Justice Award for reporting on the drug war, and the John Hancock Award for business reporting. Lynn was also a Knight Medical School Fellow at the University of Michigan.

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