Yahoo Finance A Look at Walgreens’s Valuation Compared to Its Peers
Walgreens in Fiscal 2Q16: An Earnings Beat and a Miss on Revenues
Market reaction to earnings release
Shares of Walgreens Boots Alliance (WBA) fell 3.4% after the earnings release on April 5, 2016. The company is currently trading 16% below its 52-week high of $97.30. Year-to-date (YTD) as of April 7, 2016, WBA has fallen 2.1%. In comparison, CVS Health (CVS) and Rite Aid (RAD) have risen 4.6% and 2.4%, respectively.
Dividend payments
Walgreens has paid dividends to its shareholders for 40 consecutive years. It’s dividend payments have grown by a CAGR (compounded annual growth rate) of ~20% over the last ten years.
The company declared a quarterly dividend of $0.36 per share in 2Q16, which was a 6.7% increase over the year-ago dividend. The one-year forward dividend yield on WBA’s current stock price stands at 1.9% as of April 7, 2016. The dividend yield on CVS Health’s stock is slightly lower at 1.7%. Rite Aid doesn’t offer any dividends.
Earnings overview and outlook
In its fiscal 2Q16 earnings release, WBA raised the lower end of its earnings guidance for fiscal 2016 by $0.05. The company is now anticipating 2016 earnings to be $4.35–$4.55. In comparison, Wall Street is predicting WBA’s earnings to be $4.49 per share for fiscal 2016. For the third quarter of 2016, analysts are predicting EPS (earnings per share) to increase 12.7% YoY (year-over-year) to $1.15 per share. Investors seeking to add exposure to WBA can consider the Market Vectors Retail ETF (RTH), which invests 5% of its portfolio in WBA.
Valuation compared to peers
WBA is currently trading at a one-year forward earnings multiple of 17.1x. It’s operating in the middle of its PE (price-to-earnings) range of 15.5x–20.3x. Its valuation is comparable to close competitor CVS Health, which is also trading at around 17x. Healthcare supply chain companies Amerisource Bergen (ABC) and McKesson (MCK) are trading lower than CVS and WBA. ABC is currently trading at a one-year forward earnings multiple of 14.6x, while MCK is trading at 12.5x.
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