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Walgreens Boots Alliance Inc WBA

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Morningstar’s Analysis

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Strong Quarterly Performance Is the Best Remedy for Negative Market Sentiment; Raising FVE to $50

Soo Romanoff Equity Analyst

Analyst Note

| Soo Romanoff |

Narrow-moat Walgreens reported normalized first-quarter earnings notably ahead of CapIQ consensus. The beat was driven by a broad-based recovery across the segments as well as the traction of cost savings initiatives. The wild swings in market sentiment had adversely pressured shares but the stabilization noted in the quarter, anticipated second-half recovery, and 4% dividend provide stability in an increasingly challenging economic environment. Based on the reported performance, we have raised our internal estimates and as a result increased our fair value estimate to $50, up from $42 per share.

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Company Profile

Business Description

Walgreens Boots Alliance operates nearly 19,000 locations in 50 states and 25 countries. The core defensive positioning is primarily around the pharmacy that are placed in high traffic locations. Currently, the company has the largest retail pharmacy market share (around 20%, excluding mail) which provides significant cost advantages and scale. Annually, the company generates over $140 billion in revenue consisting of U.S. retail pharmacy (around 75%), International pharmacy (around 10%) and pharmaceutical wholesale (around 20%). Walgreens has established strategic partnerships to offer incremental services to increase average revenue per customer and has an equity stakes in AmerisourceBergen (26%) and Sinopharm Holding Guoda Drugstores (40%).

108 Wilmot Road
Deerfield, IL, 60015
T +1 847 315-3700
Sector Healthcare
Industry Pharmaceutical Retailers
Most Recent Earnings Nov 30, 2020
Fiscal Year End Aug 31, 2021
Stock Type High Yield
Employees 331,000