Can Walgreen Keep Rebounding in 2013?

As 2013 begins, now's a good time to look at the future prospects for the stocks you own. If you don't know where a company's headed in the next year and beyond, then it's impossible to make an informed decision about whether you should add the stock to your portfolio -- or sell it if you already own it.

Today, I'll look at Walgreen (NYSE: WAG  ) . The drugstore chain bounced back in 2012 after having faced a huge strategic challenge, but it's still working hard to repair the damage. Below, you'll learn more about Walgreen's prospects for 2013.

Stats on Walgreen

 

 

Average Stock Target Price

$39.91

Fiscal 2013 EPS Estimate

$3.28

Fiscal 2014 EPS Estimate

$3.66

Fiscal 2013 Sales Growth Estimate

2.4%

Fiscal 2014 Sales Growth Estimate

4.4%

Forward P/E

10.3

Source: Yahoo Finance.

Will Walgreen fill investors' prescriptions for growth in 2013?
Analysts have mixed feelings about Walgreen. Their target price for the stock isn't very ambitious, implying just a 5% gain from current share-price levels. Yet, with solid earnings growth and modest increases in sales, Walgreen should look better fundamentally as the year goes on.

Despite a resilient stock price, Walgreen is still struggling to get over the impact of the customers it lost during its dispute with pharmacy benefit manager Express Scripts (NASDAQ: ESRX  ) . With revenue from its fiscal first quarter down almost 5% from the year-ago quarter, and earnings plunging 25%, Walgreen hasn't been able to earn back former customers' loyalty.

You can tell just how big a deal the Express Scripts fiasco continues to be by looking at competitors' results. Rite Aid (NYSE: RAD  ) managed to earn a profit for the first quarter in five years thanks to the customers it gained from Walgreen. Meanwhile, CVS Caremark (NYSE: CVS  ) is pushing ahead in its efforts to retain its share of former Walgreen customers.

Still, Walgreen will press ahead in two major ways that are important for investors. First, Walgreen has an impressive 36-year dividend-increase streak that it should maintain easily. Second, its acquisition of Alliance Boots gives it growth opportunities in Europe, which is currently hard-hit by economic woes, but which should rebound, and give Walgreen the chance to boost its global presence.

Walgreen will have to work hard to recover; but with the right moves, it should be able to succeed. Meanwhile, with its 3% dividend, investors have every incentive to be patient holding the stock.

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Click here to add Walgreen to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 13, 2013, at 10:37 PM, ctyank99 wrote:

    Who cares about WAG?

    RITE AID

    I’ve been laughed at for liking this stock, but I see my local store with noticably more foot traffic and The action in the stock price has justified my belief that RAD is great stock.

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