Evercore ISI affirms Walgreens Boots Alliance (Nasdaq: WBA) with a Buy rating and $95 price target following Q2 results reported earlier Tuesday:

Analyst Ross Muken offered the following initial thoughts:

WBA management continued to navigate through a challenging environment, with deft cost savings, strong international retail profits and continued synergy realization helping to offset NA pharmacy Rx softness and continued reimbursement pressure. Flu played a major role in the comp miss (to no surprise), with incidence down ~16% in the Q (likely rebounded somewhat in March), although front end proved modestly better.

On the margin side in NA, GMs were strong despite numerous headwinds (finally beating estimates), while total OM was a touch below as SG&A actually ticked-up sequentially. On the international business, retail posted strong profit dollar results despite slightly soft Fx neutral top-line, while wholesale missed our estimates broadly by a modest margin. Of note, the company did buy some stock in the Q, which was enabled by very strong FCF generation (conversion >140%). With respect to the guidance tweak higher we view it as more a formality given how strong the year is tracking so far, although a modest positive none the less.

Lastly on RAD, the update was as expected, and we await further commentary on the conference call. All-in this is a reasonable result in a tough tape, albeit today’s reaction could be muted given the recent run in shares into the print. Additionally we also believe shares could react to commentary on the CC with respect to vertical integration, particularly in the face of the company’s recent relationship announcement with Optum (UNH).

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