Earnings Preview: Walgreens - Analyst Blog

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Walgreen Co . ( WAG ) is slated to release its first quarter 2013 earnings results on Friday, December 21, 2012, before the market opens. The Zacks Consensus Estimate currently stands at 67 cents per share for the quarter. This represents year-over-year growth of 6.3%.

With respect to earnings surprises, Walgreens edged past the Zacks Consensus Estimate in one of the trailing four quarters and reported in-line earnings result in one of the quarters. The average surprise over the last four quarters remained negative at 2.53%.

Walgreens has already reported sales for the first quarter of 2013. Total sales in the first quarter came in at $17.34 billion, down 4.5% year over year and trailing the Zacks Consensus Estimate of $17.63 billion, missing the top-line Zacks Consensus Estimate for the third time in a row.

Previous Quarter Synopsis

Walgreens reported a 4.5% year over year decline in adjusted earnings per share in the fourth quarter of fiscal 2012 to 63 cents. However, it was well ahead of the Zacks Consensus Estimate of 55 cents.

Total sales decreased 4.9% year over year to $17.1 billion in the fourth quarter. The decline was primarily attributed to the generic wave in the pharmaceutical industry. Front-end comparable store sales (those open for more than a year) dropped 1.3% while prescription sales (63.3% of total revenues) dipped 8.1% in the quarter.

Agreement of Analysts

Estimate revision trends reflect a bearish sentiment towards the company's earnings for the first quarter of fiscal 2013. Over the last 30 days, 6 out of the 14 estimates were revised downwards with no upward revision for the quarter.

Walgreens' dismal performance in recent months coupled with concerns regarding the company's performance in the coming quarters underlines the absence of any positive movement, depicting a lack of driving events. While the reconciliation with Express Scripts ( ESRX ) is comforting, Walgreens' ability to win back customers remains a looming concern.

Magnitude of Estimate Revisions

The magnitude of the estimate revisions for Walgreens depicts a slightly negative bias for the upcoming quarter. The Zacks Consensus Estimate dropped three cents over the last 30 days and a penny in the last 7 days to 67 cents for the first quarter.

Recommendation

While fiscal 2012 was a challenging year for Walgreens, we look forward to fiscal 2013 as near-term headwinds wane. Despite a lukewarm start to fiscal 2013, the company has a broad-based platform to drive growth going forward. Moreover, the company has left no stone unturned to bolster sales, ranging from a customer loyalty program to stimulate consumer demand to resorting to inorganic means.

In a small way, the stock inched towards a 52-week high of $37.35 on December 17, 2012. We currently have a long-term 'Neutral' recommendation on the stock which carries a short-term Zacks #3 Rank (Hold). Its peer CVS Caremark ( CVS ) carries a Zacks #2 Rank (Buy).



CVS CAREMARK CP (CVS): Free Stock Analysis Report

EXPRESS SCRIPTS (ESRX): Free Stock Analysis Report

WALGREEN CO (WAG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: CVS , ESRX , WAG

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