Will Walgreen Recover in 2012's Second Half?

With half of 2012 in the record books, it's important to take a look at whether the stocks that interest you can live up to their full potential. By making sure you know about a company's future plans and possible challenges, you can make a better decision about whether it's a smart investment for your portfolio.

Today, let's take a look at Walgreen (NYSE: WAG  ) . As we saw in our look at Walgreen last month, the drugstore retailer has seen some challenges after losing an important relationship with a pharmacy benefits manager. As competitors scurry to take advantage of the situation, how can Walgreen get its mojo back? Let's take a quick look at Walgreen's prospects for the rest of the year and beyond.

Stats on Walgreen

Average Stock Price Target $35.36
Fiscal 2012 EPS Estimate $2.61
Fiscal 2013 EPS Estimate $2.93
Fiscal 2012 Sales Growth Estimate (0.4%)
Fiscal 2013 Sales Growth Estimate 1%
CAPS Rating (out of 5) ***

Source: Yahoo! Finance.

Can Walgreen get healthy again?
There's no disputing that Walgreen has suffered a great deal from its ongoing dispute with Express Scripts (Nasdaq: ESRX  ) . Although the companies agreed in June to drop lawsuit claims against each other, a lack of a deal going forward has forced many Express Scripts members to turn to competitors CVS Caremark (NYSE: CVS  ) and Rite Aid (NYSE: RAD  ) . The effect has definitely been measurable and significant, with a 10% drop in same-store sales in June. Both rivals hope to hold on to the prescription customers they've gained even if Walgreen and Express Scripts come to terms.

But Walgreen does have some things going for it. Health-care reform should push more prescription customers into the mix, and Walgreen should get its fair share of increased demand. Moreover, between a push into groceries and its acquisition of Europe's Alliance Boots, the company has found at least one roadmap toward potential future growth.

One interesting move Walgreen made recently was to name retired McDonald's (NYSE: MCD  ) CEO Jim Skinner as chairman of its board of directors. The move could help Walgreen direct its future course while giving CEO Gregory Wasson some help in integrating the company's acquisitions.

All in all, Walgreen has gotten through tough times before. With a fairly substantial drop, today's stock price represents a good buying opportunity if you believe in the drugstore chain's strategy going forward.

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Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool owns shares of Express Scripts and McDonald's. Motley Fool newsletter services have recommended buying shares of Express Scripts and McDonald's. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.


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  • Report this Comment On July 19, 2012, at 11:34 AM, TMFGalagan wrote:

    After this went to press, this morning's announcement that Walgreen and Express Scripts have made a new deal pushed shares up more than 10% as of now:

    http://finance.yahoo.com/news/express-scripts-walgreens-anno...

    best,

    dan (TMF Galagan)

  • Report this Comment On July 20, 2012, at 1:18 AM, AgAuMoney wrote:

    For a close today up well over 11%. Makes my composite entry over multiple buys the last few weeks of about $30 look pretty good. Here's hoping it sticks! :)

    But even if it doesn't, I'm in it long-term... for as long as WAG can grow earnings and grow dividends.

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