Walgreen will release its quarterly earnings report before the bell Tuesday, and while it may not have had a strong quarter, one analyst told CNBC it is still a “buy.”
BB&T Capital Markets senior analyst Andrew Wolf said Walgreen’s stock is a good investment if your trading horizon is longer than six months.
“I think it’s undervalued and a really good contrarian idea. It depends on your trading horizon…because of some uncertainty right now,” Wolf said.
In December, the company ceased filling prescriptions for Express Scriptsafter it failed to reach a new agreement when the contract with the pharmacy benefits manager (PBM) expired. Walgreen has lost sales because of this, but Wolf says it has already replaced 15 percent of that lost business.
“The way it gets replaced is clients of Express Scripts choose to do business with another PBM,” the analyst said. One example is Nebraska, which switched from Blue Cross of Nebraska to United Healthcare to keep Walgreen’s pharmacies on its prescription plan.
The U.S. Supreme Courtdebate over the Obama health-care law could present a problem for pharmacies on the whole, but Wolf was dismissive.
“It’s not an overhang," he said. “If that goes through and the Supreme Court upholds the law, then up to 30 million people who are uninsured could be added and most of them would get prescription coverage — that’d be great for drug stores.”
Both Walgreen and CVS Caremarkare adding clinics at some of their locations, which, according to Wolf, could be a boon to both companies because of a shortage of primary care physicians.
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BB&T Capital makes a market in the securities of WAG.