UPDATE - Barclays Downgraded Walgreen (WAG) to Underweight; Cutting Estimates & PT

UPDATE - Barclays downgraded Walgreen (NYSE: WAG) from Equalweight to Underweight, price target lowered from $39 to $29.

Barclays analyst said, "We do not believe that WAG's stock price fully reflects the asymmetrical outcomes of its contract dispute with Express Scripts (Nasdaq: ESRX). If the issue is resolved, we see upside to $40, or about 14%, getting the stock back to where it was before the conflict was announced, but adjusted for the market decline since then. If it doesn't get resolved, we think an annualized drop in earnings of $0.46 is possible, not taking into account the Express Scripts/Medco (NYSE: MHS) merger. This assumes WAG keeps 15% of the ESRX business and cuts expenses by $200 million. Far worse is if the ESRX-MHS merger goes through. WAG would most likely lose that business too, and we estimate that EPS would be cut by an annualized $0.85 in total. The EPS multiple would likely be compressed too, since the value of WAG business will have been shown to be lower than assumed."

"Our FY11 EPS remains unchanged at $2.63 but our FY12 decreases to $2.74 from $3.10 and our FY13 also decreases to $2.74 from $3.68."

To see more ratings changes on WAG, Click Here

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