Bank Of America Raises Walgreen Price Target

Bank of America raised its price target on Walgreen Company WAG from $64 to $67  and maintained a Neutral rating following the company’s November sales report.

Analysts led by Robert M. Willoughby noted that “WAG’s same store sales in November (+4.5 percent) beat a +4.3 percent consensus view on stronger pharmacy results (+6.7 percent vs. +5.6 percent) that offset a weaker front-end experience (+0.8 percent vs. +1.9 percent).

“Its absolute sales metric for the month ($6.36 billion) implies it came in modestly ahead of our 1Q15 (Nov-30) revenue forecast, which we are raising, but we are maintaining our EPS estimates on continuing profitability concerns and higher debt levels.”

“WAG’s shares may trade higher today on the above-consensus result, but upside continues to stem from the pharmacy business, where profitability has been consistently challenged. Opening more stores in what we view as a largely saturated pharmacy market may exacerbate the unfavorable profit trend, and front-end traffic remained uninspiring, giving us little confidence in any kind of rapid turnaround under expected new management,” according to Willoughby.

The firm raised its price target “to reflect the improved sentiment,” but the firm remained “Neutral on the shares for what continues to screen as one of our worst ROIC profiles with weak profitability and high capital spending.”

Walgreen recently traded at $67.69, up 1.41 percent.