Analyst says Walgreen shares will hold steady until investors see new Express Scripts trends
NEW YORK (AP) -- Shares of Walgreen Co. slipped Monday after an analyst downgraded the stock, saying he is taking a wait-and-see attitude after Walgreen settled its differences with pharmacy benefits manager Express Scripts Holding Co.
THE SPARK: UBS Investment Research analyst Jason DeRise downgraded the stock to "Neutral" from "Buy." He said Walgreen shares will probably trade around their current levels until investors can get a sense of the effects of its new deal with Express Scripts, including how many prescriptions the Deerfield, Ill., company will regain and how profitable those prescriptions are.
Since the new contract begins Sept. 15, DeRise said that will happen in the first half of Walgreen's fiscal 2013, or the period beginning Sept. 1.
THE BIG PICTURE: Pharmacy benefits managers like Express Scripts pay drugstores money to fill prescriptions. Walgreen stopped filling prescriptions for Express Scripts on Jan. 1, saying Express Scripts' payments were too small. Walgreen said it was willing to give up billions of dollars in revenue instead of filling unprofitable prescriptions, and the company's sales dropped after the contract expired.
Express Scripts bought competitor Medco Health Solutions in April in a deal that was announced after Walgreen and Express Scripts said they would stop doing business. That meant Walgreen ran the risk of being left out of Medco's business starting next year. The companies said Thursday that they had agreed to a new multi-year deal. They did not disclose terms.
SHARE ACTION: Shares of Walgreen fell 84 cents, or 2.4 percent, to $33.76 in afternoon trading. The stock rose 11.8 percent Thursday and lost 2 cents Friday.