Shares of the drug store operator are up roughly 10% in the past year, and Credit Suisse wasn't feeling too confident ahead of the print. The firm, which has a neutral rating and $38 price target on the stock, says earnings risk "looks high" for quarter and it's expecting a below-consensus profit of 51 to 53 cents a share.
"We believe Walgreens remains one of the most controversial and mistrusted names within consumer," Credit Suisse said. "Q4 sets up to be another marquee event, given recent operational headwinds, the many moving parts to this story, and the possibility for more detailed guidance. We see risk to the Q4 consensus estimate, both from technical and operational issues, but the 2013 outlook seems to be setting up more favorably. While there is risk in the near-term and numerous long-term structural challenges, we openly admit the stock seems to set up positively over the next few quarters given negative investor sentiment and improving momentum."
Despite an anticipated "strong" contribution from demand for generics, Credit Suisse expects fourth-quarter sales to be challenging and said it thinks Walgreen is also shouldering some costs from launching its loyalty program and preparing for the return of
About fiscal 2013 though, the firm was feeling more optimistic.
"We project 2013 EPS at $3.05 (from $3.00), roughly in line with consensus of $3.06," Credit Suisse said. "Earnings momentum should shift positively at Walgreens in 2013, as some ESRX customers return, the company cycles easy flu and front-end comparisons, the generic wave accelerates, and synergies/accretion from AB kick-in. While there are headwinds, such as a MHS pricing reset, loyalty card/ESRX related costs, and an overall challenging competitive/consumer environment, we still see solid growth in earnings."
A slight majority of the sell side is still in wait-and-see mode on Walgreen with 16 of the 26 analysts covering the stock at hold (13), underperform (2) and sell (1). The median 12-month price target on the shares is $39 vs. Thursday's closing price of $36.60.
Check out TheStreet's quote page for Walgreen for year-to-date share performance, analyst ratings, earnings estimates and much more.
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