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How Investors Reacted to Walgreens’s Fourth-Quarter Results

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Walgreens stock after fourth-quarter results

As we’ve already seen in this series, Walgreens Boots Alliance (WBA) posted better-than-expected fourth quarter of fiscal 2018 earnings yesterday but missed the top-line projections.

The mixed results left investors confused. Walgreens stock initially plunged 3.6% to $69.74 in early trading hours. But then it surged ~2.9% to $74.38 during the day before finally closing at $70.90, which was ~2% below the previous day’s closing price.

Shares of competitor drug-store chains CVS Health (CVS) and Rite Aid (RAD) also closed lower yesterday. CVS fell 7.3% after the United States Department of Justice approved its deal with Aetna. Rite Aid fell 6.3%.

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Year-to-date performance

Walgreens stock has fallen 2.4% YTD (year-to-date). It fell ~10% after Amazon announced the acquisition of Pillpack in June.

Walgreens has underperformed the S&P 500 Index, which has risen 2% YTD, and the S&P 500 Food and Staples Index, which has risen 3.2% YTD.

In comparison, CVS Health (CVS) has risen a modest 1% YTD, while Rite Aid (RAD) has plunged ~47%.

Analysts’ actions after fourth-quarter results

There were no rating changes for Walgreens after its fourth quarter of fiscal 2018 results. However, Jefferies analysts raised their target price from $65 to $73, Braid analysts raised it from $69 to $71, and Barclays analysts raised it from $77 to $80. Walgreens currently has an average price target of $74.22, reflecting an upside of 5%.

Walgreens is currently rated 2.6 on a scale of 1 for “strong buy” to 5 for “sell.” About 33% of the analysts covering the stock have recommended a “buy,” 63% have recommended a “hold,” and 4% have recommended a “sell.” CVS doesn’t have any “sell” ratings, and RAD is rated a “sell” by 25% of the analysts covering the stock.

Investors looking for exposure to WBA through ETFs can invest in the Van Eck Retail ETF (RTH). WBA makes up 4.7% of RTH.

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