UBS Maintains a 'Buy' on Walgreen (WAG); January Comps Will Represent First Month Without ESRX

UBS maintains a 'Buy' on Walgreen (NYSE: WAG) price target lowered from $40 to $38.

UBS analyst says, "For January, we are projecting WAG monthly same-store sales of -6.7%, which includes a -10% pharmacy comp, and a +0.7% front-end comp (Table 2). The Rx comp assumes a low-teens recapture rate of ESRX scripts in Jan/Feb, with a trend toward 25% recapture by year-end. We expect WAG January total company sales of $5,654 mil (-4.7% y-o-y). With minimal initial cost-cutting (as per WAG mgmt), this translates to $0.72 EPS for upcoming F2Q12, well below $0.79 Street."

"...Further, we assume WAG’s raw SG&A dollar spend increases annually by +1-3% (down materially from historical trend), and also assume modest gross margin expansion with culling of low-margin ESRX payor. The overall changes lead to FY12 EPS cut from $2.73 to $2.48, FY13 from $2.95 to $2.68, and FY14 from $3.34 to $3.04."

Other stocks of note: Express Scripts (Nasdaq: ESRX), CVS Caremark (NYSE: CVS)

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 $33.36 yesterday.

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