) touched a new 52-week high of $50.50 on Wednesday, May 15, 2013
following strong annual results of Alliance Boots GmbH. Walgreens
has a 45% equity ownership stake in the European pharmacy-led,
health and wellbeing retailer Alliance Boots. The closing price
of $50.03 of the largest drug store chain in the U.S. represents
a solid year-to-date return of 32.1%.
The Stock Driver
On Wednesday, Alliance Boots reported its annual results for the
year ended Mar 31, 2013. The 12.7% rise in Alliance Boots'
underlying profit was seen to boost market sentiments for its
minority stakeholder Walgreens as the stock rose 0.89% during
As per management at Alliance Boots, the companies are
progressing in a timely manner for the joint synergy program.
Walgreens is on track to attain synergies across joint operations
to be between $100-$150 million in the first year and $1 billion
by the end of 2016. The company expects the Alliance Boots deal
to be accretive to its adjusted EPS by 18-22 cents in fiscal
Nonetheless, the announcement from across the Atlantic is not the
only upside for Walgreens. Of late, the company looks to be in an
upturn following a string of strategic maneuvers. Earlier this
week, Walgreens extended its agreement as a network pharmacy
provider in the
) pharmacy benefit management (PBM) retail network. The deal
provided some positive momentum to the stock.
In March, Walgreens and Alliance Boots inked a 10-year deal with
), effective Sep 1, 2013, to improve global pharmaceutical supply
chain for branded as well as generic drugs. AmerisourceBergen
will replace Walgreens' current pharmaceutical distributor
) as the existing contract is set to expire in Aug 2013. The
company and Alliance Boots also have the right to purchase a
minority stake (of 7%) in AmerisourceBergen, exercisable up to
Given Walgreens' recent efforts that boost its growth prospects,
the stock received a series of positive estimate revision.
However, lingering bearish sentiments, reflected in a few
downward estimate revisions, weigh on the stock. The stock
carries a Zacks Rank #3 (Hold). While we remain on the sidelines
for Walgreens, CVS Caremark, carrying a Zacks Rank #2 (Buy)
warrants a look.
AMERISOURCEBRGN (ABC): Free Stock Analysis
CARDINAL HEALTH (CAH): Free Stock Analysis
CVS CAREMARK CP (CVS): Free Stock Analysis
WALGREEN CO (WAG): Free Stock Analysis Report
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