Walgreens Closing Stores, WBA Stock Price Jumps, Is CEO Considering Mergers With Rite Aid, Express Scripts?
With Walgreens closing stores, investors have apparently rewarded management’s decision by causing the Walgreens stock price to rise throughout Thursday. There is also talk about acquisitions, and analysts believe it is possible Rite Aid and Express Scripts may be in the sights of the new Walgreens Boots Alliance (WBA) management.
In a related report by the Inquisitr, the company is having Walgreens closing stores as part of a $1.5 billion plan that hopes to lead to international growth.
Even before the major decision was announced, the WBA stock price rose 1.2 percent in premarket trade on Thursday. By the end of the closing bell, the Walgreens stock price rose 5.63 percent, reaching $92.62 per share. According to Market Watch, this notable increase in the WBA stock price was due to the drugstore chain’s profits being better than expected.
“For the quarter ended Feb. 28, net earnings more than doubled to $2.04 billion, or $1.96 a share, from $716 million, or 74 cents a share, in the same period a year ago. Excluding non-recurring items, such as gains on previously held equity interests, adjusted earnings per share came in at $1.18, beating the FactSet consensus of 95 cents. Sales rose 35.5 [percent] to $26.57 billion, missing the FactSet consensus of $27.83 billion. Same-store sales climbed 6.9 [percent], boosted by a 9.7 [percent] jump in pharmacy sales, compared with FactSet consensus of 5.3 [percent] and 7.2 [percent], respectively. The stock has gained 15 [percent] year to date, while the S&P 500 has advanced 1.1 [percent].”
“This quarter marked a solid start for our new company, and I remain as optimistic as ever about our long-term future. At the same time, we understand the work that is needed to proactively address headwinds such as reimbursement pressure and competition. Our work includes several key areas of focus to create value,” Walgreens Executive Vice Chairman and Acting CEO Stefano Pessina said in a statement, according to the Street.
When Pessina discussed the successful $16 billion acquisition of European drug retailer Alliance Boots, he also mentioned the company may be willing to consider more mergers, acquisitions or joint ventures. While Pessina did not name any specific companies, Jeff Jonas, a portfolio manager with Gabelli Funds, believes WAB might attempt to acquire Express Scripts, a Pharmacy Benefits Manager (PBM). Jonas believes a merger between the two makes “tons of sense,” but also doubts it will actually happen.
Rite Aid Corp. also mentioned in February that it would like to spend $2 billion to buy a PBM, but rumors keep claiming that Walgreens might be willing to snap them in return. Some investors may be concerned about the possibility of WBA and RAD leading to an antitrust case, but InvestorPlace believes the U.S. Federal government would let such a merger occur. Even with Walgreens closing stores, the company has around 8,300 stores in the United States, and Rite Aid has about 4,500 stores. This merger would provide greater competition for CVS Health Corp, which had $140 billion in revenues in 2014, while both Rite Aid and Walgreens combined only generated $103 billion in recent years.
[Image via Sage Capital]
