Walgreen (NYSE: WAG) recently reported fourth quarter profits that beat Wall Street's expectations. Walgreen's has been making operational improvements and will continue to do so going forward.
Walgreens reported a net profit of $436 million, or 44 cents per share, for the quarter ended August 31st, which is a -1.5% decrease compared to the same quarter a year ago. The quarterly profit results topped the Wall Street consensus by 5 cents a share. The results edged the full-year earning per share (EPS) estimate up by 3 cents. Full-year over year results declined by -7% from 2008. The company reported a 2009 profit of $2.01 billion, or $2.02 per share, excluding restructuring charges, vs. $2.16 billion, or $2.17 per share, in 2008.
Walgreens said the results from the 35 stores that were revamped under its remodeling program were encouraging; WAG is going to expand its remodel roll-out which it calls Customer Centric Retailing (CCR) to 400 additional stores in Texas starting this fall. Customer Centric Retailing (CCR) format will be expanded to additional markets after the holiday season.
WAG is also pushing more deeply into providing basic medical care services at its in-store clinics. WAG noted that it has almost 16,000 pharmacists and nurse practitioners licensed or certified to administer immunizations. Walgreens is currently promoting $24.99 flu shots at stores that it says are available every day. With all of the current flu concerns in the media and the flu season getting under way this should add to Walgreen's profits for next quarter.
WAG has also signed a deal with Caterpillar to fill the prescription needs of the construction equipment maker's employees and retirees. It was a solid quarter for Walgreen in a tough operating environment. Strong sales of high-margin generic drugs helped to boost the company's bottom line, aided by the fact the anticipated benefits from the company's restructuring efforts appear to have helped sooner than was expected.
General merchandise sales weakness impacted over all profits for WAG, inventory management will help the general merchandise category moving forward. The attention mainstream media has given to a renewed outbreak of the H1N1 flu in many states should also boost customer traffic in coming weeks as the vaccine becomes widely available and those individuals that contract the flu seek treatments. The worse the flu season is the better earnings will look next quarter. Also the increased attention on the regular flu as a result should also boost sales of regular flu shots.
Walgreens on October 15th announced a new stock buyback program, which expires at the end of 2013 it replaces the old program that still had about $655 million remaining, the Deerfield, Illinois-based company said. Since 2004, Walgreens has repurchased more than $1.3 billion of common stock.
WAG is a well positioned company and is a long term buy, however with the 9/29/09 gap in WAG still open you may want to wait to buy WAG. A general market correction in the 4th quarter will take WAG lower into the gap. I see buying WAG at the $34-35 level as a better entry point long term. Currently WAG is trading at $39.60 and sports a P/E of 19.57 & dividend yield of 1.40%. A buy at the $35 level would be at a more reasonable P/E of 17.50 & dividend yield of 1.55%. The 50 day moving average for WAG comes in just above $35 which should support any retracement moves which will come.
Note: I do not own WAG
