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Walgreens' shares will hit a $100 mark within a month
11 september 2015

Iremain upbeat about the shares of Walgreens Boots Alliance (WBA), one of the most renowned pharmacy retail giants in the US. Recently, Walgreens teamed up with Providence Health & Services to open up to 25 new in-store clinics in the states of Oregon and Washington. The new in-store clinics would provide better quality healthcare at affordable prices. Moreover, through this collaboration, Walgreens and Providence will construct a governance council to take advance retail healthcare system to its next level – by integrating both the organizations’ prowess in delivering retail health services.

Walgreens’ financials for the third quarter of its fiscal 2015 were decent, with earnings per share comfortably beating consensus estimate. The company generates solid cash flows and boasts a strong capital structure, which allowed it to raise a quarterly dividend by 6.7% to 36 cents per share. This offers a healthy annualized dividend yield of 1.6%.

Besides, Walgreens is actively participating in cost saving programs which should help to reduce margin pressure. In the second quarter of fiscal 2015, the company had identified additional opportunities for cost savings, on the basis of which it increased the total expected cost savings program by $500 mn to $1.5 bn by the end of fiscal 2017.

During FQ3, management made healthy progress with respect to the program, reorganizing Retail Pharmacy USA field operations and continuing to optimize its corporate office operations. The company closed 9 of the planned 200 US stores with approximately 70-80 additional shut-downs to be affected by the end of fiscal 2015. Walgreens also reduced Retail Pharmacy USA’s IT cost structure to enable significant core system investments over the next several years.

With target price of $100, Walgreens’ shares look attractive for medium-term investment, in my opinion.

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Walgreens' shares will hit a $100 mark within a month

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