The Way Of Walgreens

What Is New In Walgreens' Partnership With Fred's?

Some of Walgreens' pharmacies are expected to carry the generic version of Abilify, which many see as a step toward reducing generic drug prices.

Reuters reports: "The deal [for Abilify] was agreed by Walgreens and generic drug supplier Dr. Reddy's Lab, which will also get an undisclosed payment, the sources said."

Walgreens made its acquisition offer to Fred's for Fred's $900 million in stock and some cash on March 14. According to the Times, Fred's said it would form a special committee to consider Walgreens' offer. On March 15, it was reported that Fred's would delay a decision.

Fred's operates more than 600 discount general merchandise stores. As of Dec. 31, 2015, its stores were located in 45 states and the District of Columbia, Puerto Rico and Guam.

In January, it sold its Spring Hill, Tennessee, store to Dick's Sporting Goods.

Earlier this year, Fred's bought 865 stores and some related assets for $950 million.

Fred's has been planning to sell its pharmacy benefit management (PBM) business, led by Phil Wrigley, to win shareholder support for its deal with Walgreens, the Times reports.

Walgreens has been expanding its PBM and other specialty offerings. The company operates a network of 3,400 U.S. stores.

In its third-quarter earnings release in November, Walgreens said, "This is an exciting time to be in the specialty pharmacy industry and we are looking forward to serving patients through our expanded pharmacy platform, in addition to our national distribution network."

"The company further announced plans to launch a new national specialty pharmacy, Walgreens Care Coordination, that will provide the pharmacy benefits manager and healthcare providers with access to Walgreens' specialty pharmacy inpatient and home infusion offerings in a convenient outpatient setting."

It added, "The cost of specialty medicines is escalating and today there is a limited number of specialty pharmacy providers. To help patients...

The Rise Of Walgreens Stores: Show You The Money

Walgreens stock could rebound next year

With the weak retail environment showing no signs of abating, Walgreens Boots Alliance Inc. WBA, +0.37% has fallen into a general funk.

But as these charts indicate, the stock could have many years of relatively consistent growth ahead.

This group of analysts created the first table of this type in 2012, and this time it looks like a straight upward line. But what makes Walgreens stock intriguing is that, while the group expects a 13% increase in earnings per share, you could actually see a doubling of that number from last year's level.

GDP growth, which the government announced earlier this year, looks like it could be as high as 5.3% in 2018. But that increase, according to FactSet, is only about one-quarter of the forecasted EPS increase. And the only real driving factor there is tax reform.

That gives me a much better outlook for Walgreens than other analysts, who see all of that growth coming from EPS. If, on the other hand, tax reform comes to pass, and if it happens by 2018, you can look for the stock to generate a 24% return, according to analysts.

Earlier this week, as Walgreens Boots Alliance's WBA, +0.37% stock was getting slammed because of the news that Amazon.com Inc. AMZN, -0.54% was interested in the company's $4 billion acquisition of online pharmacy PillPack, an old analyst call circulated on social media.

By going on the record as to what Walgreens said, analyst Tom Schoeman ended up embarrassing himself, to be sure. It's one thing for analysts to tell you how they really feel; quite another for them to make themselves the objects of ridicule.

Schoeman, who has been bearish on Walgreens for a long time, said the following on July 7, 2010, in a call with analysts to discuss Walgreens' quarterly financial results.

It is the most blatant example of a company cannibalizing its own customers, in our opinion, and yet [Walgreens] is doing it. This is what you get when you have three classes of investors. Investors on the back end of the curve think it's a great deal for Walgreens, investors in the front end of the curve think it's a loss, and no one on the middle sees it as any great gain.