America’s largest drug store chain, Walgreen Co, (WAG) posted a 19.5 percent gain in quarterly profits, based largely on increases in prescription drug sales and flu shots.
First-quarter net income was $489 million, or 49 cents a share, versus $408 million, or 41 cents a share in the same period one year ago. The Deerfield, Illinois retailer earned 52 cents per share, excluding special items. Analysts were expecting Walgreen’s to earn 48 cents a share on revenue of $16.24 billion. Revenue was higher by $1.41 billion to hit $16.36 billion from $14.95 billion in the same year-ago period.
Walgreen and its Take Care in-store clinics have sold 5.4 million flu shots compared to 1.2 million for the entire flu season last year.
Despite the positive earnings results, analysts at Citi (C) issued a “sell” recommendation and price target of $31 for Walgreen, an 18 percent fallback from the current share price of $36.69. Citi’s negative outlook is based on the slower square foot growth, higher expenses, and greater competition. These factors are expected to lower earnings growth going forward.
Walgreen operates over 7,140 drugstores, and plans to add wine and beer sales to many of its stores. The company pays a 1.5 percent annualized dividend.
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