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Cantor Fitzgerald: Walgreen 'Moment Of Truth' On Inversion Deal Monday?

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During Walgreen Co.'s (NYSE: WAG) upcoming third-quarter conference call Tuesday, managers may once and for all address whether they plan to move headquarter to Switzerland.

"The moment of truth could be at hand," said Cantor Fitzgerald's Ajay Jain, who maintains a Sell rating and $50 target.

A move offshore could generate $797 million in annual tax savings and boost earnings three-fold over the next several years, Barclays estimated last week.

Although a number of investors and analysts have touted the savings available to Walgreen in a so-called inversion move, Jain highlighted what he called long-term negatives.

Those may include "political dimensions, a possible PR nightmare and backlash from customers, " Jain said in a research note Monday.

An inversion for Walgreen, which acquired a major stake in Swiss-based Alliance Boots in 2012, would be about as easy as printing up new stationery.

Until recently Walgreen has minimized the possibility, but Jain senses "a shift in messaging" from management.

As for fundamentals affecting third-quarter performance, "gross margin is the main wild card, Jain said.

"We will be especially interested in any commentary from Walgreen management related to reimbursement pressures and potential for generic drug cost increases," Jain said.

Walgreen traded recently at $73.70, down 1.13 percent. Its 52-week high of $76.39 came last week amid inversion talk.

Latest Ratings for WAG

Dec 2014JP MorganMaintainsOverweight
Dec 2014BarclaysMaintainsEqual-Weight
Dec 2014SunTrust Robinson HumphreyDowngradesBuyNeutral

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Posted-In: Ajay Jain Cantor FitzgeraldAnalyst Color Analyst Ratings


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