Walgreen Co. should top Wall Street expectations when it reports fiscal fourth-quarter results Tuesday, and the nation's largest drugstore chain could benefit if it quickens its combination with European health and beauty retailer Alliance Boots, according to a Citi analyst.
Analyst Deborah Weinswig raised her price target on the stock to $63 from $57 and said in a Sunday research note she expects the company to report adjusted earnings of 75 cents per share, which is higher than the consensus forecast among analysts for 72 cents per share.
The analyst expects to see continued progress from Walgreen in both its work with Alliance Boots and on a supply agreement it announced earlier this year with pharmaceutical wholesaler AmerisourceBergen Corp.
She also said the company is starting to see a benefit from its Balance Rewards customer loyalty program, and Walgreen management has made fixing its performance in the front end of its stores, or the area outside the pharmacy, a priority.
Walgreen spent about $4 billion last year to buy a stake in Alliance Boots, a Swiss company that runs the largest drugstore chain in the United Kingdom. Walgreen also has a window of time, starting in 2015, in which it can purchase the remaining 55 percent stake of Alliance Boots that it does not own.
Weinswig said in a research note she thinks the company can accelerate the benefit it receives from the deal if it moves up that time frame. She added that she'll be listening for signs of the company planning to do this when executives talk to analysts Tuesday.
"We think there would be a significant benefit to the two companies working more closely together sooner rather than later," she wrote.
Walgreen runs more than 8,100 stores in 50 states, the District of Columbia, Puerto Rico and Guam.
The company's stock slipped 10 cents to $54.41 in premarket trading Monday but has climbed 47 percent so far this year.