Walgreen Had a Great First Quarter But Still Trails CVS

Before the last shopping weekend for the holiday season commenced, Walgreen  (NYSE: WAG  ) reported its first-quarter earnings for the fiscal year of 2014. The company's stock was up 2% before the market opened on Friday, Dec. 20, in anticipation of the news. Investors and Wall Street analysts breathed sighs of relief as Walgreen met earnings estimates and put forth pretty-solid results for the quarter ended Nov. 30, 2013.

Diving in
Improving upon first-quarter results from fiscal year 2013 is exactly what Walgreen managed to do. Net earnings per diluted share were most impressive, increasing 66.1% from $0.43 a year ago to $0.72 which matched the consensus estimate. In addition, adjusted net earnings increased by 24.4% to $688 million compared to the same period a year ago when adjusted net earnings totaled only $553 million.

Total revenue also climbed by 5.9% to $18.3 billion while net income soared 68.3% from a year ago to $695 million, and it didn't stop there. The company experienced an increase in comparable stores' front-end and total sales and reported an increase in the number of prescriptions filled and sold from the prior period.

Future goals and expectations
Walgreen is confident that its second-quarter and full-year results for fiscal year 2014 will yield another solid performance. To achieve future high earnings growth, Walgreen plans to continue monitoring and controlling its operating expenses through careful management, according to the company's CEO. This strategy will allow Walgreen to focus its attention on building front-end sales for its stores as well as increase its gross profit.

With winter just around the corner, Walgreen also projects that it will give just as many flu immunizations, if not more, in the second quarter of fiscal 2014 than it did in the prior period. Continued expansion will remain the company's main focus which it will achieve through new store openings, attracting customers to sign up for its member rewards program, and making further advancements in pharmaceuticals.

Drugstore wars
Walgreen currently competes with CVS Caremark  (NYSE: CVS  ) and Rite Aid  (NYSE: RAD  ) . All three companies operate as drugstores, selling products such as food, beverages, toiletries, and of course pharmaceuticals. By looking at the table below, you can quickly gather which company is growing the fastest.

Company Name

Most Recent Quarterly Revenue

Same period a Year Ago Revenue

YoY Growth for Last 3 Fiscal Years

CVS Caremark Corp.

$32 Billion

$30.2 Billion

13.36%

Rite Aid Corp.

6.28 Billion

$6.24 Billion

0.36%

Walgreen Company

$18.3 Billion

$17.3 Billion

0.03%

CVS Caremark has actually grown the most over the past three fiscal years compared to Walgreen and Rite Aid. This, of course, is attributed to CVS Caremark's success in opening new CVS/pharmacy stores, which currently total over 7,300, managing its health care program for pharmaceutical services, and operating its Minute-Clinics. Although Walgreen just had a great first quarter, its growth over the past three fiscal years has been very poor. Both Walgreen and Rite Aid have much to learn from CVS Caremark.

Foolish takeaway
It would be wrong to not applaud Walgreen for its solid quarterly performance, but historically the company has had a rough time growing at a decent rate. Foolish investors need to take this into account before diving into shares of Walgreen, as the company has to compete with much larger rival CVS Caremark, which is growing at a much faster rate.

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