Will Walgreen Company Earnings Outgrow Rite Aid and CVS Caremark?

Walgreen (NYSE: WAG  ) will release its quarterly report on Friday, and investors have been pleased with the drugstore chain's success lately, bidding its shares to all-time record highs within the past month. Yet with Rite Aid (NYSE: RAD  ) having risen from the ashes to become profitable and with CVS Caremark (NYSE: CVS  ) still posing a big obstacle to Walgreen's dominance of the industry, the question investors are asking is whether Walgreen earnings can keep up the pace.

Walgreen has a solid history of leadership among drugstore companies, having made moves to solidify its position in the U.S. market while making aggressive moves to take advantage of opportunities overseas. Yet past mistakes have opened the door to Rite Aid and CVS poaching customers from its doors, and shareholders want reassurances that Walgreen's management won't make those same mistakes again. What will the future hold for Walgreen? Let's take an early look at what's been happening with Walgreen over the past quarter.

Stats on Walgreen

Analyst EPS Estimate

$0.72

Change From Year-Ago EPS

24%

Revenue Estimate

$18.36 billion

Change From Year-Ago Revenue

6%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

What's next for Walgreen earnings?
In recent months, analysts have gotten a little cautious about Walgreen earnings, trimming November-quarter estimates by about 5% and making smaller reductions to projections for fiscal 2014 and 2015. The stock has kept climbing, posting about a 5% gain since mid-September.

Walgreen's climb to new highs stemmed in large part from its August-quarter earnings report. A 6.1% gain in prescription revenue helped overall sales rise more than 5%, with a greater proportion of generic-drug business helping boost earnings by a whopping 86% from the year-ago quarter. Non-prescription sales had weaker growth but still eked out gains of 1.6%.

But competitors have had success of their own. Rite Aid delivered an unexpected profit last quarter, marking its fourth-straight profitable quarter, and it could well continue its string of good news with a favorable report on Thursday. Just on Wednesday, CVS gave favorable earnings guidance that was in line with fiscal 2014 estimates, and the combination of a 22% boost in its dividend and a $6 billion stock buyback authorization sent the stock soaring today. Walgreen and Rite Aid both rose in sympathy, but until we see their respective reports, investors can only hope that they'll benefit from the same positive trends that CVS experienced.

In making its case for the status of top drugstore chain, Walgreen has done a better job of taking advantage of international opportunities than CVS and Rite Aid. Its acquisition of U.K. drugstore giant Alliance Boots offers geographical diversification at a time in which the U.S. market is in flux, with the Affordable Care Act changing the landscape of health care domestically. Strategic moves like offering its own prepaid card shows the extent to which Walgreen is willing to innovate in order to differentiate itself from its peers, while moving forward with health-care clinics to serve simple health-care needs proves that Walgreen is willing to stand up to competition from CVS Caremark, Rite Aid, and other players in the drugstore industry.

In the Walgreen earnings report, be sure to compare the company's growth to what Rite Aid reports on Thursday. With competition becoming cutthroat, Walgreen needs to make sure it remembers its core values and keeps giving its customers what they want.

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