Walgreens Boots' Retail Pharmacy Strong Despite Several Woes

On Jun 19, we issued an updated research report on Walgreens Boots Alliance, Inc. (NASDAQ:WBA) . We are currently looking forward to the company’s modified Rite Aid contract, expected to benefit the company in the long run. The stock carries a Zacks Rank #3 (Hold).

We are encouraged by the company’s consistent sales increase in the Retail Pharmacy International business. Moreover, Walgreens Boots has been gaining traction from a slew of strategic tie-ups, which brought more patients to its U.S. pharmacies.

We are also upbeat about the company’s alliance with Express Scripts, via which, both companies aim to expand respective existing group purchasing efforts. This latest pact is expected to improve Express Scripts’ supply chain and make medicines including biosimilars affordable and accessible to patients.

The above positives apart, Walgreens Boots’ decision to buy a 40% stake in China’s Sinopharm Holding Guoda Drugstores looks promising as that should provide a strong impetus to the company’s worldwide retail pharmacy business. The limited number of Rite Aid stores’ acquisitions also impresses us for which, the company has recently secured a regulatory approval.

However, Walgreens Boots faces headwinds in the form of fierce competition and tough industry conditions. Even though the company continues to reap benefits from its growth initiatives, major business tycoons are already advancing in pharmacy businesses with a fair market share.

Notably, a slowdown in generic introduction over the last few years has been affecting Walgreens Boots’ margins. Also, an escalated reimbursement pressure and a generic drug cost inflation have been hampering Walgreens Boots’ margins significantly.

Over the past three months, shares of Walgreens Boots have underperformed the industry. The stock has lost 3.2% against the industry’s 5.6% increase.

Key Picks

Some better-ranked stocks in the broader medical sector are Illumina, Inc (NASDAQ:ILMN) , Intuitive Surgical (NASDAQ:ISRG) and Chemed Corporation (NYSE:CHE) . While Illumina and Intuitive Surgical sport a Zacks Rank #1 (Strong Buy), Chemed carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Illumina expects long-term earnings growth of 19.3%.

Intuitive Surgical has an expected long-term earnings growth rate of 12.1%.

Chemed has an expected long-term earnings growth rate of 10%.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>