Walgreens Boots Alliance (WBA) Stock Gains Today on New Acquisition Talk

Walgreens Boots Alliance (WBA) shares are climbing today after the company's CEO said that it may look for acquisitions in the U.S. healthcare sector.

Author:: Tony Owusu
Publish date:: Mar 12, 2015 11:38 AM EDT

NEW YORK (TheStreet) -- Shares of Walgreens Boots Alliance (WBA) - Get Report are up 0.52% to $82.94 in trading on Thursday after CEO Stefano Pessina, who was behind the merger of Walgreens and Europe's Boots Alliance, said that he expects the company to make more acquisitions, this time in the U.S.

Pessina saidthat he could see the company making more deals in the healthcare sector as the industry continues to experience changes following the implementation of the Affordable Care Act, according to Reuters.

"The next big one will probably be in the U.S. because it is such a big market. It is a fascinating market. It is similar to what we had in Europe 20 years ago because the intervention of the government changes all the rules," Pessina said at a conference.

"My passion, my dedication to this country are completely unchanged. Boots is part of the British establishment and will continue to be part of the British establishment," the Italian former head of Boots Alliance continued.

Last year Walgreens purchased the remaining 55% stake of Boots Alliance that it did not own for $15 billion.

Walgreens Boots is a core holding of Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio, and Cramer expects the company to follow in CVS (CVS) - Get Report footsteps and purchase a pharmacy benefits manager.

"I expect them ultimately to buy a pharmacy benefits manager because that has worked so well for CVS and Rite Aid (RAD) - Get Report although it is a bit of a departure from the company's roots. The public ones are all expensive right now but we are noodling on their next move like everyone else," said Cramer.

Separately, TheStreet Ratings team rates WALGREENS BOOTS ALLIANCE INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate WALGREENS BOOTS ALLIANCE INC (WBA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

WBA's revenue growth has slightly outpaced the industry average of 0.0%. Since the same quarter one year prior, revenues slightly increased by 6.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Food & Staples Retailing industry average. The net income increased by 16.4% when compared to the same quarter one year prior, going from $695.00 million to $809.00 million.
Net operating cash flow has significantly increased by 675.18% to $1,031.00 million when compared to the same quarter last year. In addition, WALGREENS BOOTS ALLIANCE INC has also vastly surpassed the industry average cash flow growth rate of 30.73%.
WBA's debt-to-equity ratio of 0.73 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that WBA's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.66 is high and demonstrates strong liquidity.
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.
You can view the full analysis from the report here: WBA Ratings Report