Recently announced, largest pharmacy chain in the U.S.
) forged an agreement with the United States Drug Enforcement
Administration (DEA) and Department of Justice to resolve all
unsettled litigation. The agreement settles administrative and
civil issues regarding the distribution and dispensation of
controlled substances following DEA's assessment of the company's
As per the agreement, Walgreens will pay $25 million for the
third quarter ended May 31, 2013. Including this amount, the
company will pay $80 million in total. Walgreens envisages the
total impact of the agreement and other related costs to be 4
cents to 6 cents per share in the third quarter of fiscal 2013.
This will act as a drag on third-quarter earnings.
As reported earlier, Walgreens' third-quarter sales of $18.34
billion missed the Zacks Consensus Estimate of $18.54 billion
despite growth of 3.3% year-over-year. This marks the fifth
consecutive sales miss for the company.
With sales missing the expectation and the recent news on
settlement weighing on the bottom line, we wait to see whether
Walgreens will beat the Zacks Consensus Estimate of 90 cents for
the quarter. The company is slated to report third quarter
results later this month.
Last year, in April, DEA inspected and issued an Order to Show
Cause (OSC) to 6 Walgreens retail pharmacies in Fla. and
extracted certain controlled substance prescription records and
other documents. This was followed by an OSC and Immediate
Suspension Order (ISO) on the company's distribution facility in
According to the settlement with the DEA, Walgreens will
surrender its DEA registrations at 6 of its pharmacies in Fla.
until May 2014 and Jupiter distribution center until Sep 2014.
Presently, the company owns over 800 pharmacies in the state.
Under the agreement, Walgreens will continue to battle
prescription drug abuse. The company also picked out certain
compliance measures. This underlines Walgreens' focus to combat
prescription drug abuse in the U.S.
Given the impact of the agreement on the third-quarter earnings,
the settlement seems like another dilemma for the company.
Currently, Walgreens carries a Zacks Rank #3 (Hold).
On the other hand, other stocks such as
GNC Holdings Inc.
Rite Aid Corporation
) are worth considering. These stocks hold a Zacks Rank #2
GNC HOLDINGS (GNC): Free Stock Analysis
HERBALIFE LTD (HLF): Free Stock Analysis
RITE AID CORP (RAD): Free Stock Analysis
WALGREEN CO (WAG): Free Stock Analysis Report
To read this article on Zacks.com click here.