Credit Suisse Upgrades Walgreens, Sees Potential Cost Savings And 'Strategic' Deals

In a report published Thursday, Credit Suisse analyst Edward J Kelly upgraded the rating on

, from Neutral to Outperform, while raising the price target from $90 to $110. Analyst Edward Kelly believes that Walgreens Boots' front-end focused turnaround strategy is progressing well and the company is all set to solve its "longer-term competitive issues through M&A and partnerships." Kelly said that the acquisition of

was not "a strong possibility," but the company's warrants could be exercised to acquire ~46 million shares over the next two years at an average cost of $52 per share, while "holding the position would yield estimated annual minority interest of ~$0.33/share." In the report Credit Suisse noted that continued aggressive steps by Walgreens Boots would allow the company to surpass its cost reduction target of $1.5 billion. "We believe the company is poised to take more aggressive action to improve its competitive position in the near future and see numerous attractive options," the report added. Kelly expects the company's growth prospects to be driven by its cost cutting efforts, purchasing synergies, ABC minority interest and share repo. Any organic growth or M&A accretion would allow the company to perform even better. The EPS estimates for FY16 and FY17 have been raised from $4.45 to $4.55 and from $5.15 to $5.30, respectively.