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Walgreen (WAG) Price Target Raised to $82 at Deutsche Bank

December 23, 2014 1:21 PM EST
Get Alerts WAG Hot Sheet
Price: $76.05 --0%

Rating Summary:
    0 Buy, 0 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 12 | Down: 10 | New: 10
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Deutsche Bank maintained a Buy rating on Walgreen (NYSE: WAG) and raised its price target to $82.00 (from $69.00). The change follows Q1 results.

Analyst George Hill said, "While gross margins came in weaker than expected on continued pharmacy reimbursement pressure, SG&A costs were below our expectation and a lower tax rate (27.4%) also padded results. On the call, the company detailed how reimbursement pressure is expected to remain a constant headwind to gross margin expansion, but that Walgreens is expecting to see some relief from payers with respect to generic inflation. Management also remains focused on targeting discretionary costs at the corporate level."

"We maintain our Buy on WAG shares and lift our price target to $82, reflecting 17.5x our C2016 EPS estimate of $4.66, the midpoint of our target range for the pharma services universe on C2016E. This is up from 15x, largely on a higher group multiple. Our multiple assumption pushes out one year but subtracts two turns from our CVS assumption, reflecting WAG’s cost structure and the greater impact of reimbursement pressure and generic drug inflation. We see potential for earnings estimates to increase if management has overestimated the long-term margin pressure or increases cost savings," 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 $74.27 yesterday.



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