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Walgreens (WBA) Earnings Preview

by | Oct 11, 2021

Walgreens (WBA) reporting earnings on 10/14 before the open with the Street looking for $1.02 on $33.3B in sales. The next quarter is guided to $1.21 on $33.6B while the FY is looking for $4.76B on $131.5B in sales, a 6% decline Y/Y. Shares have closed higher in three of the last four with an average closing move of 5.1% and a max move of 7.4%. The current implied move is 5%. Options flow has been bullish recently with buyers on 10/4 in the November $50 calls, over 8000X, and buyers on 9/28 in the November $52.50 calls over 15,000X. The October $49 calls have been bought over 5000X as well recently. The $41.2B company trades 9.5X earnings, 0.3X sales, and 12.5X FCF with a 4% yield. Walgreens is undergoing a transformation year after new CEO Roz Brewer took the reins in March. The company sold off Alliance Healthcare to Amerisource in June for $6.3B to help cut down debt and invest in their longer-term growth strategy focused on retail and healthcare tech. The company has also continued to expand their partnership with VillageMd with plans to open 500-700 new full-service doctors offices within the next five years. WBA was rumored to be in talks with Evolent Health (EVH) on an acquisition recently, and potential to see a deal announced as well. WBA is coming off a strong quarter in July as their core retail business continues to improve with better traffic and sizable gains in beauty and photo. Overall, the company still has a lot of moving parts at play with vaccinations likely slowing down but upside potential overall with a focus on flu season upcoming and potential for strategic actions. Analysts have an average target for shares of $54 with a Street High $68 from Baird. The firm like the recent results including positive core trends and update on strategic initiatives but thinks the market will remain muted until we get more clarity on 2022. Hedge fund ownership rose 1%. Aristotle Capital a top holder of stock. Glenview was a buyer of 1M shares last quarter, doubling their position. On the chart, WBA is trading below monthly value and the declining 21- and 55-EMA are just above at $48.50. A move higher has room to $50 in the near-term and then setting up for a wide base breakout that can move up to $55. WBA has been in a fairly defined range for most of 2021 but continues to hold the top of yearly value at $46.50.

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