Walgreen (WAG) Earnings Could Benefit as CVS (CVS) Halts Tobacco Sales; Goldman Comments

February 5, 2014 11:24 AM EST
Get Alerts WAG Hot Sheet
Price: $76.05 --0%

Rating Summary:
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    Up: 30 | Down: 30 | New: 23
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Goldman Sachs maintained a Conviction Buy on Walgreen (NYSE: WAG) with a price target of $67.00. Analyst Robert P. Jones thinks Walgreen's January same-store-sales miss is overshadowed by news competitor CVS (NYSE: CVS) is ending sales of tobacco products.

"WAG reported total January SSS of 2.9%, below GS/Street of 3.5%/3.4%, reflecting soft script growth and lower flu activity yoy. Despite this, shares are outperforming today as WAG's largest retail competitor (CVS) announced that it will be exiting the tobacco category," said Jones.

"We estimate that tobacco is 2-4% of WAG's sales, and if WAG can capture 20% of CVS' tobacco and related sales, it would represent $0.03 (or 1%) to EPS. A bright spot on the January SSS report was that total SSS on a 2-year stack basis improved notably to 6.6%, vs. flat last month, which is impressive now that WAG is facing more difficult comparisons, having fully cycled the ESRX impact," he added.

For an analyst ratings summary and ratings history on Walgreen click here. For more ratings news on Walgreen click here.

Shares of Walgreen closed at $55.95 yesterday.

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