Walgreens Boots Alliance Inc. buy gerihouse

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Nach erreichen des All Time HIghs ging es kurz runter, und das nutze ich zum Einsteigen!

Walgreens Boots Alliance Inc stock hit an all-time high of $88.76 during trading Friday, after rumors crossed wires that it may acquire peer Rite Aid Corporation. The speculations emerged after Walgreens CEO Stefano Pessina stated that the investors should expect more acquisitions in the industry, with specific hint toward, “this time in the US”.

The CEO said that the company is contemplating to land more deals in the healthcare arena, as the sector continues to see improvement in the wake of the adoption of the Affordable Care Act, reports Reuters.

After Walgreens acquired Alliance Boots earlier this year, there was immense hype about the merged entity realizing billions in synergies. However, the stock has been on a hazy trail ever since on the back of currency pressures from the euro exposure it has gained from the acquisition.

In a research note addressed to investors, Deutsche Bank has increased the target price on Walgreens Boots Alliance stock by 8.5% from $82 to $89, while maintaining the Buy rating. However, on the back of recent currency fluctuations and the investment firm’s expectation of continued euro weakness as part of its “Forex Team’s Euroglut thesis”, the analyst has adjusted its earnings estimate downwards.

Deutsche Bank explains that while the corporation has significant currency exposure through Alliance Boots, most of it is British Pound denominated. “A smaller portion of earnings is in Euros and mostly tied to the AB wholesaling and Alphega franchise businesses. We estimate a 12 to 17 cents’ negative impact to WBA’s annualized EPS in light of the expected currency movements in the Euro and Sterling,” said the analyst George Hill.

While shedding light on the Alliance Boots unit’s operational performance, the investment firm says that its earnings are derived from many international regions. This increases the company’s foreign currency risk that is tied to the strengthening of US Dollar, and the consequent weakening of Euro and Pound. Majority of Alliance Boots’ operations are then tied to the UK-based Boots, while the Alliance Boots Wholesale segment catering to other regions carries more Euro exposure.

In light of the investment firm’s view on foreign currency exchange, the firm has lowered its earnings estimate for fiscal year 2015 (FY15) by 2.5% to $3.67. The analysts’ revised model assumes a negative impact carried onto FY16 from the weakening of Sterling and Euro. The firm assumes that the currencies will continue to deteriorate into next year, and incorporates it into its profit assumptions for the different regions. While 2015’s estimate saw only a 10 cents decrease in earnings, 2016 estimate has been slashed by 18 cents, as analysts model continuing Euro deterioration.

Though it assesses a considerable risk to earnings from currency exposure, the firm is still bullish on the stock and maintains a Buy rating. Its new target price is based on a “19.5x our C2016 EPS estimate of $4.54, reflecting an increase in our peer group multiple”.

The major risks to the company not being able to realize this target price are reimbursement pressures, the competitive environment in the pharma industry, and in case the company does not realize the synergy benefits it expects from Alliance Boots acquisition. In such a scenario, the shares could very well follow a considerable downward trajectory and lose the gains they have managed to land over the past week.