Walgreen's (WAG) Stock Down on Disappointing Earnings

Shares of Walgreen Company (WAG) closed down -2.83 or -5.89 percent to $45.22 on Tuesday after the company announced its 2013 third quarter earnings. While adjusted earnings were $0.85 per share, versus $0.72 in the same quarter last year, the number was shy of the analyst consensus, which called for earnings of $0.90 per share according to a Zacks Consensus Estimate. The lower than expected earnings were in part due to a sluggish economy, a higher tax rate and interest expenses in the third quarter, as well as an eleven percent increase in the size of the company's shares outstanding.

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Deerfield, Illinois based Walgreen Company, better known as Walgreens is the largest chain of drug retailing stores in the United States. Operating more than 8,300 stores in all fifty states, D.C., Puerto Rico and Guam, the company had more $2.12 billion in net income last year. Adjusted net earnings for Walgreen's fiscal third quarter came to a record $812 million, or 85 cents per share compared to adjusted earnings of $628 million or 72 cents in the same period one year ago, an increase of +29.3 percent. GAAP earnings came to $624 million or 65 cents per share, versus $537 million or 62 cents per share in 2012's third quarter. The adjusted earnings included several onetime charges and expenses the company incurred in a legal settlement with the U.S. DEA. Walgreen third quarter earnings were boosted by the company's acquisition of European health and cosmetics retailer Alliance Boots, which accounted for approximately ten cents of the quarter's earnings overall. Sales increased +3.2 percent to $18.3 billion, nevertheless, first nine month sales declined -0.5 percent to $54.3 billion. Front end comparable store sales for stores open for more than a year rose +0.4 percent, but customer traffic in comparable stores decreased -3.9 percent, while basket size increased +4.4 percent, total sales in comparable stores increased +1.4 percent. Walgreens opened or acquired a total of 39 new stores in Q3, versus 52 in the same quarter a year ago. In a conference call with analysts after the earnings release, Chief Executive Officer Greg Wasson said that, "This quarter we continued to see a strengthening in our pharmacy performance as we maintained strong margins and increased our retail pharmacy market share from 18.4 percent to 19.2 percent year over year", he continued "we have worked hard over the past year to crystallize our strategies and ensure we have the growth drivers in place to support long term value creation for Walgreens and our shareholders. We're now focused on the execution that will propel both day to day performance in the short term and the growth we expect over the next two to three years." Walgreens stock is trading at 20 times earnings and has a dividend yield of 2.3 percent. While analysts were disappointed with the company's record earnings, it could be an opportunity for investors. Other News About WAG Walgreens' CEO Discusses F3Q13 Results - Earnings Call Transcript Transcript of analyst call with Walgreen CEO, Greg Wasson. Walgreens Agrees to Record-Breaking $80M Fine to Settle Florida Oxycodone Probe Walgreens settles with the DEA for $80 million. Other Stocks in the News Google+ to Overtake Facebook in 2016? Searchmetrics speculates Google+ could overtake Facebook in three years. Sprint Investors Approve $21.6 Billion SoftBank Acquisition Shareholders approve deal with Japanese Softbank. Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Jun 26, 2013
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

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