) is scheduled to release its fourth quarter and fiscal 2012
earnings on Friday, September 28, 2012, before the market opens.
The Zacks Consensus Estimates forecast earnings of 56 cents per
share in the quarter and $2.59 per share for fiscal 2012. This
represents a year-over-year decline of 2.63% and 1.91%,
Analyzing past trends, Walgreen has exceeded estimates in two of
the last four quarters and remained in line in one. The company has
an average negative surprise of 0.34% over the trailing four
The company has already reported sales for the fourth quarter
and fiscal 2012, which were at $17.08 billion, down 4.9% year over
year and $71.64 billion, down 0.8%, respectively. Walgreen's sales
were adversely affected by the contract termination with
) in January 2012.
Comparable store sales for the quarter dropped 8.7% along with a
1.3% decline in front-end comparable store sales. Moreover,
prescriptions filled at comparable stores decreased 8% during the
quarter while comparable pharmacy sales dropped 12.6%. Besides,
comparable store sales for fiscal 2012 decreased 3.6%.
Previous Quarter Highlights
Walgreen reported a 4.6% year-over-year drop in earnings to 62
cents per share in the third quarter of fiscal 2012, in line with
the Zacks Consensus Estimate.
Total sales also declined 3.4% to gross $17.8 billion in the
reported quarter, marginally missing the Zacks Consensus Estimate
of $17.9 billion. Front-end comparable store sales (those open
for more than a year) during the quarter decreased 2.6%.
Along with earnings, Walgreen announced its partnership with
Alliance Boots to become the world's first pharmacy driven health
and wellbeing retail with more than 11,000 stores in 12
Agreement of analysts
Estimate revision trends depict a negative bias toward the
company's earnings in both the fourth quarter and fiscal 2012. Over
the last 7 days, out of the 16 estimates, five were revised lower
with only one positive revision for the quarter. For the full year,
bearish sentiments prevail with 6 downward revisions accompanied by
only one revision in the opposite direction.
The bearish sentiments reflect the disappointing performance of
the company over the recent past. It also exhibits the concerns
regarding the company's performance in the upcoming quarters.
Despite the reconciliation with Express Scripts, Walgreen's ability
to win-back its previous customers remains a concern. Per the new
agreement, Walgreen will start filling prescriptions from Express
Scripts' customers from September 15, 2012. There is also a lack of
clear visibility with respect to the realization of synergies with
The Zacks Consensus Estimate of 56 cents for the fourth quarter
dropped by a penny over the last 60 days and by a couple of cents
over the last 90 days. It, however, remained unchanged over the
last month. For fiscal 2012, estimates have moved down by a penny,
over the past week and month, to $2.59 per share.
In addition to several other headwinds, over the past few
quarters, Walgreen remained negatively affected by high
unemployment levels and lower discretionary spending. However, the
company has maintained its shopping spree. Following the strategic
alliance with Alliance Boots, this leading retail pharmacy chain
acquired a mid-South US-based regional drugstore chain from Stephen
L. LaFrance Holdings Inc. and members of the LaFrance family for
$438 million. We expect these new ventures to boost growth going
forward. Nevertheless, it remains to be seen if these measures can
neutralize the headwinds related to the Express Scripts
Moreover, with resumption of the contract with Express Scripts,
sales are expected to improve, though winning back clients remains
crucial. As a result, to stimulate customers' demand amidst a
challenging macroeconomic scenario, the company also launched a
customer loyalty program.
We have a Neutral recommendation on Walgreen over the long term.
The stock retains a Zacks #3 Rank (short-term Hold rating).
EXPRESS SCRIPTS (ESRX): Free Stock Analysis
WALGREEN CO (WAG): Free Stock Analysis Report
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