Walgreens Reaches New 52-Week High - Analyst Blog

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Shares of Walgreen Co. ( WAG ) 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 Wednesday.

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 2013.

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 CVS Caremark ( CVS ) 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 AmerisourceBergen Corporation ( ABC ), effective Sep 1, 2013, to improve global pharmaceutical supply chain for branded as well as generic drugs. AmerisourceBergen will replace Walgreens' current pharmaceutical distributor Cardinal Health ( CAH ) 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 23%.

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 Report

CARDINAL HEALTH (CAH): Free Stock Analysis Report

CVS CAREMARK CP (CVS): 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 , Stocks

Referenced Stocks: ABC , CAH , CVS , PBM , WAG

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