Baird Maintains Outperform On Walgreens Ahead Of Earnings

Walgreens Boots Alliance Inc WBA is scheduled to report its third quarter results on July 6. Analysts at Baird reiterated an Outperform rating and $98 price target on the stock, arguing that while the third quarter might bring some surprises, they still “really like this story” near term.

Walgreens has managed to comfortably beat the Street’s expectations for seven consecutive quarters. For the third quarter, Baird analysts are modeling EPS of $1.14, in line with the Street. However, they expect revenue to come in below expectations “on tough comparisons, f/x headwinds, and poor Street modeling in several areas.”

The recent Brexit poses a new headwind. Nonetheless, “initial currency reaction appears manageable, [and the analysts] Still expect upper half of FY16 profit guidance.”

Topical items to watch in the call include:

• The company’s relationship with Valeant Pharmaceuticals Intl Inc VRX
• Further benefits from AmerisourceBergen Corp. ABC
• Management changes
• Portfolio ameliorations like a Russian divestiture
• Some Rite Aid Corporation RAD updates

The research note said Baird’s Outperform rating is based on Walgreens’ corporate rejuvenation, the experts' comfort in expectations for fiscal 2017, and the belief that Rite Aid could work as an important catalyst.