William Blair Maintains Outperform On Walgreen As Future Developments Represent Good News For Investors

In a research report released yesterday, William Blair analyst Mark Miller reiterated an Outperform rating on Walgreen co. (WAG), as he thinks that Walgreens will pursue some portion of the following: 1) close step two of the AllianceBoots acquisition sooner than the February to August 2016 time frame; 2) have Alliance Boots’ management run the combined companies; 3) cut billions of dollars of operating expenses; 4) adopt an aggressive capital structure with increased debt; and 5) implement a corporate inversion to lower taxes. These are highly complex and interrelated issues, but our judgment is that Walgreens may communicate plans to implement half to two-thirds of these measures when it updates investors in a month.

Miller commented: “We maintain our Outperform rating because we believe these developments should represent, in the aggregate, good news for investors. Once we understand the upside potential from these nonoperating measures, the focus may return to the fundamentals and, of course, they do matter. Most concerning ispressure on pharmacy profitability with cost inflation in generics (versus reimbursement contracts with assumed deflation), an issue that could affect Walgreens’ P&L by hundreds of millions of dollars annually, to our understanding”.

According to TipRanks.com, analyst Mark Miller currently has an average return of -9.2% and a 33% success rate. Miller is ranked #2974 out of 3182 analysts.

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