Walgreen (WAG) Surges On Blow-Out Fourth Quarter Results

Shares of Walgreen (NYSE: WAG) are 9% higher today following better-than-expected fourth quarter results this morning. The company easily topped the most aggressive street estimates as strong cost controls continued for the company.

Walgreen reported EPS of $0.47, ex-items, 8 cents better than the Wall Street consensus of $0.39 and also beat the 'street high' EPS estimate of $0.45. Sales rose 7.6% to $15.7 billion, versus the consensus of $15.68 billion. Total sales in comparable stores open more than a year were up 2.4% in the quarter, while front-end comparable drugstore sales declined 1.4% in the quarter. Prescription sales, which accounted for 66.5% of sales in the quarter, climbed 9%, while prescription sales in comparable stores increased 4.5%.

Analysts at Goldman Sachs noted that the bulk of the outperformance came from FIFO gross margin, which was 70 bp above their forecast. They said the 'Rewiring for Growth' initiative benefited the bottom line by $0.04 net, which they said lends credence to the idea that the 2010 impact from the program will be close to $0.30 on an annualized basis. This, they said, could boost FY10 EPS beyond the firm's $2.30 estimate and perhaps approach the $2.40 street-high number. The firm is maintaining their Neutral rating on Walgreen.

Walgreen's news is boosting shares of rival CVS (NYSE: CVS) by 3%.

UPDATE: Click here to see some highlights from Walgreen's Q4 conference call.

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