Walgreen Entering New Year in Good Health
And that's despite the atrocious operating environment.
Asian stocks got a goose last night. The Hang Seng and the Nikkei were up 0.69% and 1.91%, respectively. European stocks were in positive territory early this morning, too. And here in the US, we're currently trading higher.
Here's what I'm focused on this morning:
It certainly wasn't the talk of the town yesterday, but I think the chain's first-quarter release deserves a little look-see.
It put up $0.52 excluding items, which was pretty cool because the Street was at $0.48. It beat on the top line, as well.
Some quick thoughts on why I continue to like the company:
1. Above and beyond the whole Americans-are-getting-older-and-need-prescriptions case (we've all heard this argument before), its stores are clean, eye-pleasing, convenient, carry a slew of items everyone needs, and have pretty competitive prices. It's not Walmart (WMT) cheap, but competitive.
2. When I look at the competition, Walgreen and CVS (CVS) are the folks to reckon with -- the standouts. The little guys -- like the Rite Aids (RAD) -- don't interest me.
3. It's not a sexy story right now, but I think the company keeps clicking out earnings on a pretty consistent basis. Check out the numbers it's expected to put up on the scoreboard this year, despite the atrocious operating environment. When things perk up, we could see a nice little goose on the bottom line.
This company had a nice run yesterday on heavy volume. So far this year, I think it's safe to say that things have gone pretty well for the aluminum folks.
1. But here's the thing. While I do like the company and think the stock can certainly go higher from here (the $15ish level), I'm not too excited about punching this ticket right now. It was a pretty nice pop yesterday, but I'm thinking that once the excitement of the Morgan Stanley upgrade dies down, the shares could retreat a bit.
2. To the Bulls: I'm not saying it doesn't go higher eventually, just that this may not be the best entry point. Let's keep in mind that on the bottom line, it's not expected to kick out too much this year or next.
Justin Sharon points out in his article this morning that Morgan Stanley slapped an Equal Weight rating on the company.
1. Although I like the store a great deal and think an improving economy could kick foot traffic into a higher gear, the competitive environment is just so tough that I find it difficult to get overly excited. That's why this rating does nothing for me.
2. With earnings expectations under a buck for this year and next year, I think it would have to pull back to the mid teens before my ears perked up.
Bank of America/Merrill Lynch upped the stock to a Buy.
The stock has already had heck of a run and I'd feel funny about bellying up here. In addition, the estimate for 2010 is $1.10. But even if it were at $2, I'd probably still balk a bit.
Have a great day!
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