I do not think they are chasing WAG at all. For whatever reason, WAG was knocked down far more than the market ever went down. VZ went down a total of 7% and WAG dropped a staggering 18%!! In OCT, WAG was as high as $37.45 intraday. No reason why it dropped nearly 20% in a month!!! No reason could justify it...that is why it is climbing back up nicely. With a forward PE of a paltry 9 and a healthy dividend leader with a payout ratio of 39%, it has lots of room to increase dividends for years and years to come. This stock is a MUST buy NOW. Even at $37, its a buy.
WAG hit that $37.45 high as a result of having settled with ESRX, and investors anticipating improved numbers. When those number failed to develop, the price dropped back down. WAG's numbers will look much better soon. In January we will be comparing to last year without express scripts (WAG still does not have all ESRX business to work with, notably Tricare is still not on board and there are others). Jakks Boots Alliance will be adding to the current quarter, both revenues and earnings. Many new generics have cut into revenues, but with quarterly report we will see improved pharmacy margins. Front end margins are also improving with changed advertising strategies. 2013 should be a very good year for WAG and they should outperform the industry and markets.
The jump in July was due to the ESRX settlement, not OCT. And the street already knew WAG would be light on the revs due to the loss of the ESRX alliance. Thats been know over a year. At any rate, a drop of 18% in a month was just plain absurd. Even YUM, who missed their numbers big and guided down for the entire 2013 did not drop no where near 18%. You dont chop off almost 20% of a company for something that is already known and had been factored in. If WAG had the same PE as CVS, it would be trading closer to $45 now.
chacha, July was a reaction to ESRX settlement announcement. October was a reaction to the lack of improved revenues post ESRX settlement (actual settlement date mid-Sep). WAG failing to substantially recover lost customers instantly, was a disappointment to many. WAG used to have a higher PE than CVS. That was when they were growing faster than CVS and investors thought WAG would continue to outgrow CVS. I think WAG is positioned to grow faster than CVS over the next decade. If they do, they will be rewarded with a higher PE.