NEW YORK (TheStreet) -- Shares of Walgreen Co. (WAG) are slightly lower in pre-market trade after it was reported that a billion-dollar forecasting error in the company's Medicare-related business cost the jobs of two top executives and alarmed big investors, the Wall Street Journal reports.
At an April board meeting, CFO Wade Miquelon forecast $8.5 billion in fiscal 2016 pharmacy-unit earnings, based partly on contracts to sell drugs under Medicare. Then in July, directors got a shock. Miquelon suddenly cut that forecast by $1.1 billion, the Journal says.
Earlier this month, the CFO was gone. Walgreen said several days earlier that its pharmacy chief, Kermit Crawford, would retire at year-end.
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- The revenue growth came in higher than the industry average of 4.8%. Since the same quarter one year prior, revenues slightly increased by 5.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- WALGREEN CO has improved earnings per share by 15.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, WALGREEN CO increased its bottom line by earning $2.56 versus $2.42 in the prior year. This year, the market expects an improvement in earnings ($3.30 versus $2.56).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Food & Staples Retailing industry average. The net income increased by 15.7% when compared to the same quarter one year prior, going from $624.00 million to $722.00 million.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- WAG's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that WAG's debt-to-equity ratio is low, the quick ratio, which is currently 0.61, displays a potential problem in covering short-term cash needs.
- You can view the full analysis from the report here: WAG Ratings Report