Weekly Drugstore Notes: WAG, RAD, CVS

73.99
Trefis
WAG: Walgreen logo
WAG
Walgreen

The aging U.S population, new drug therapies and the Affordable Care Act expanding insurance to millions of Americans are some of the key factors driving growth in the U.S. pharmaceutical industry. Since the end of 2012, CVS, Walgreen, and Rite Aid (the leading pharmacies in the U.S.) have significantly outperformed the S&P 500 index. [1]

Below is a weekly update (6th to 10th September) on the three companies.

Walgreen

Relevant Articles
  1. Will Johnson & Johnson Stock Rebound To Its Pre-Inflation Shock Highs of $185?
  2. Should You Pick Eli Lilly Stock After A 4x Rise In Three Years?
  3. Down 9% This Year, What’s Next For Lululemon’s Stock Past Q4 Results?
  4. Down 14% In The Last Trading Session, Where Is Adobe Stock Headed?
  5. Will Higher Federal Government Spending, Gen AI Drive Digital Security Stocks Like CrowdStrike Higher?
  6. Up 30% In A Year Is FedEx Stock A Better Pick Over UPS?

Last week, Walgreen announced a developer contest to encourage integration of its Balance Rewards application program interface (API), which allows users of other apps to earn Balance Rewards loyalty program points for making healthy choices. From now through November 28, third-party app developers can access contest details and submit an integrated app entry. The company also announced more than doubling its preferred network relationships with national Medicare Part D plan sponsors for 2015, and will be a part of preferred networks for nine plan sponsors. Walgreen declared a 7.1% annual increase in its regular quarterly dividend (33.75 cents per share), payable December 12, 2014. (Read Press Releases)

Walgreen’s stock price hovered around $60 – $61, last week. Our price estimate of $64 for the company is slightly below the the current market price, and translates into market cap of around $61 billion. Our calendar 2014 revenue and net income forecast for Walgreen stand at $78.7 billion and $2.7 billion, respectively. For fiscal year 2014 (ended August), we forecast non-GAAP EPS of $3.03 as compared to the market consensus of $3.60.

View our full analysis for Walgreen

Rite Aid

Rite Aid announced an expanded selection of costumes, accessories, party supplies, pumpkin carving kits and more in its 4,600+ stores for the upcoming Halloween season. According to National Retail Federation’s 2014 Halloween Consumer Spending Survey, total spending on Halloween this year will reach $7.4 billion. (Read Press Release) Rite Aid showed a continued growth momentum with a 4.5% annual increase in its drugstore sales ($2 billion) for the month of September, reported on October 2. (Read: Rite Aid Sales Continue To Grow In September But Margins Will Remain Under Pressure)

Rite Aid’s stock traded between $4.80 – $5.20 last week. Our valuation of $5.66 for the company is at an more than 10% premium to the current market price. For calendar year 2014, we expect Rite Aid to revenue of $26 billion and net income of $160 million. Our fiscal year 2014 (ended February) non-GAAP EPS forecast for the company is $0.45, compared to the market consensus of $0.28.

View our full analysis for Rite Aid

CVS Health

CVS Health (NYSE:CVS) Research Institute examined dramatic increases in spending on specialty medications and discussed tools to help manage these escalating costs in an article published in the October issue of Health Affairs. (Read Press Release) CVS’ stock price traded between $81 – $82 last week. Our price estimate of $77 for the company is marginally lower than the current market price (translates into market cap of approximately $95 billion). Our 2014 revenue and net income estimate for CVS is $138 billion and $6.2 billion, respectively. We estimate non-GAAP EPS of $5.67 for the company, compared to the market consensus of $4.49.

View our full analysis for CVS Health

Notes:
  1. Rite Aid, Walgreen, and CVS: Growth Becomes the New Driver, The Motley Fool, April 6, 2014 []