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Previewing Earnings for Walgreen, Research in Motion, Best Buy & Others

the BullMarket.com Staff

Stocks tend to be most volatile around earnings season, when a good or bad report can make or break it. However, a good or even great earnings report doesn't necessarily translate into a huge pop for a stock.

During earnings season, BullMarket.com publishes a comprehensive 20- to 30-page Earnings Preview report for the week ahead each Friday. Although earnings season is over, BullMarket.com has published two supplemental reports this month.

Over the past two years, BullMarket.com used the data it has collected to correctly predict investor reactions for approximately two-third of the stocks it's previewed.

In its earnings previews, BullMarket.com looks at several popular stocks set to report earnings this week and beyond, including Research in Motion (Nasdaq: RIMM - News), Walgreen (NYSE: WAG - News), Best Buy (NYSE: BBY - News), Bed Bath & Beyond (Nasdaq: BBBY - News), and Carmax (NYSE: KMX - News).

Here is just a tiny sample of what BullMarket.com wrote about Walgreen:

Walgreen and its subsidiaries engage in the operation of drugstores in the U.S. The company's stores sell prescription and non-prescription drugs, and general merchandise, such as household products, convenience foods, and personal products.

The drugstore operator reported net income for its fiscal first quarter ended November 30th of $554 million, or 63 cents per share, versus $580 million, or 62 cents per share, in the prior-year period. Share repurchases helped to boost EPS. Excluding costs related to its spat with Express Scripts (Nasdaq: ESRX - News), its profit equaled 65 cents per share. Analysts were looking for EPS of 67 cents.

"I'd like to put this quarter's results into context," CEO Greg Wasson said on the conference call. "On our September call, we anticipated we would see challenging comparisons for gross profit dollar growth in the first quarter and we did. We were up against two strong prior-year quarters. As we discussed, our first quarter is always impacted by volatility in the timing and the severity of the cough, cold and flu season, which this year is off to a slow start.

"We were also impacted by a slower rate of generic introductions this quarter compared to the prior-year quarter and that impact will reverse and then accelerate through the fiscal year with the release of new generics, including generic Lipitor. Couple that with a step-down in pharmacy reimbursement, including July rate reductions from Express Scripts that were built into our current contract, and our year-over-year increase in gross profit dollars slowed to $159 million, or 3.2%."

Walgreen said its total Q4 sales grew by 4.7% year over year to $18.16 billion.

On a same-store basis, sales rose by 2.5% in Q1. Front-end sales grew by 2.5% during the quarter on a same-store basis, while customer traffic fell -0.2% and basket size rose 2.6%.

Prescription sales on a same-store basis, meanwhile, were up 2.4%.

Prescriptions accounted for 65.5% of total Q1 sales, climbing a total of 4.2% including sales at new store locations. ...

Walgreen has beaten EPS estimates five of the past eight quarters, missing three times. During that time, the stock has risen the next session three of eight quarters. Seasonally, the stock has risen three of the last four years. ...

Outside of earnings, we think Walgreen is the better company and cheaper stock compared to rival CVS (NYSE: CVS - News), and that it has a number of tailwinds going for it, including the onset of the next generic drug cycle, the solid customer reception of its Customer Centric Retailing (CCR) initiative, and a bottom line and cash flow boost from opening less new stores that is likely to be funneled into buybacks and dividend increases.

However, without a deal with Express Scripts, results are likely to take a sizable hit, and if the Express Scripts merger with Medcogets approved, then it gets even worse for Walgreen. ...

The full BullMarket.com earnings analysis includes a look at historical earnings data and EPS trends for the companies above and more; examines past investor reactions to earnings in various contexts; gives options activity analysis; reviews previous-quarter earnings; and gives an opinion on both what earnings will look like and how investors will react based on the aforementioned data points.

Just a few of the recent correct calls BullMarket.com has made for Q4 were:

  • to be bearish on Deckers (Nasdaq: DECK - News) ahead of earnings.
  • to be bullish on Salesforce.com (NYSE: CRM - News) ahead of earnings.
  • to be bullish on Tiffany (NYSE: TIF - News) ahead of earnings.
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