The Zacks Analyst Blog Highlights: Walgreen, AmerisourceBergen, CVS Caremark, Cardinal Health and R.R. Donnelley & Sons

Zacks


For Immediate Release

Chicago, IL – May 21, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Walgreen Co. (WAG), AmerisourceBergen Corporation (ABC), CVS Caremark (CVS), Cardinal Health (CAH) and R.R. Donnelley & Sons (RRD).

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Here are highlights from Monday’s Analyst Blog:

Green Light for Walgreens, ABC Deal

 

The largest retail pharmacy chain in the U.S., Walgreen Co. (WAG) and Alliance Boots continue to make steady progress to boost their global presence in the prescription drug purchasing space. The regulatory approval for the companies’ equity investment deal in AmerisourceBergen Corporation (ABC), a major pharmaceutical service company in North America, is seen as yet more good news for investors after the positive events last week.

Investors and competitors alike have been looking forward to the regulatory clearance of the 10-year old deal between Walgreens and AmerisourceBergen, effective Sep 1, 2013. The approval boosted market sentiments as shares of Walgreens rose 1.58% on the day of the announcement. On the other hand, other players in the market such as CVS Caremark (CVS) are likely to scrutinize its branded and generic drug purchasing network and contemplate strategic possibilities.

AmerisourceBergen will replace Walgreens’ current pharmaceutical distributor Cardinal Health (CAH) as the existing contract is set to expire in Aug 2013. AmerisourceBergen already supplies specialty drugs to Walgreens.

Following the clearance, the company and Alliance Boots have the right to purchase a minority stake of 7% in AmerisourceBergen in the open market and another 16% equity stake in 2016 and 2017. As per the approval, the equity stake is exercisable up to 25% in aggregate, after accounting for the stock buyback activity of AmerisourceBergen.

Walgreens’ long-term deal with AmerisourceBergen is expected to create a kingpin in the prescription drug purchasing space. Walgreens is optimistic about the financial and operational benefits from the AmerisourceBergen deal for fiscal 2014 with margin expansion and bottom-line accretion.

Walgreens continues to gain positive momentum on the back of strategic deals. Currently, the stock carries a Zacks Rank #3 (Hold).

 

Donnelly Downgraded to Strong Sell

 

Zacks Investment Research downgraded R.R. Donnelley & Sons (RRD) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Donnelley reported first quarter 2013 non-GAAP earnings of 37 cents per share, which comfortably surpassed the Zacks Consensus Estimate by 4 cents. However, earnings per share declined 15.9% year over year, primarily due to margin contractions.

Revenues for the quarter were up a modest 0.5% year over year to $2.54 billion. Operating margin contracted 40 basis points (bps) on a year-over-year basis to 6.8% due to certain customer rebate adjustment, price pressure and unfavorable product mix.

Donnelley reiterated its fiscal 2013 guidance. For fiscal 2013, Donnelley expects revenues to be in the range of $10.1 billion to $10.3 billion, which remains flat compared to 2012.

Adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) are expected to be in the range of 11.2% to 11.4% for fiscal 2013, which is slightly lower than 12.0% reported in 2012.

The Zacks Consensus Estimate for the second quarter of 2013 has declined 17.0% (8 cents) to 39 cents over the last 60 days.

The Zacks Consensus Estimate for 2013 decreased 9.5% (16 cents) to $1.53 per share over the last 60 days. The Zacks Consensus Estimate for 2014 dropped 6.6% (10 cents) to $1.52 per share over the same period.

 

 

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Read the analyst report on WAG

Read the analyst report on ABC

Read the analyst report on CVS

Read the analyst report on CAH

Read the analyst report on RRD

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