Walgreen’s beat quarterly estimates with August quarter results of $0.49 versus $0.44 . Analysts had been looking for flat year-over-year results.
WAG has surged by 10.7% through 11:40 this morning.
It’s too late to play WAG but not to jump in with the sale of some January 2012 LEAP puts on CVS which is likely to be seeing the same business climate but is on a calendar reporting year.
CVS is up about 3% in sympathy but still looks extremely cheap at $31.50 at 11.6x the current year estimate of $2.71 and 10.5x the 2011 view. Both these estimates are subject to upward revision after seeing the WAG numbers.
I just sold some CVS Jan. 2012 $30 puts for $3.80 /share giving me a $26.20 break-even and a 16.8% margin of safety from the current quote of $31.50.
The bid on the Jan. 2012 $25 puts is still above $2 as I’m writing.
Disclosure: Author is long CVS shares and short CVS and WAG options.
CVS Caremark [NYSE:CVS] May 15, 2009 $30.30 - 1:10 PM EST
WAG and CVS are the top two drugstore operators in America with estimated 2009 sales of about $64 billion and $97 billion respectively. Both fill prescriptions on-site as well as through their mail order facilities. Pharmacy revenues were about 65% and 68% of total sales for WAG and CVS in 2008 [versus front-of-store general merchandise]. 3rd party payments were running around 95% on Rx’s for each company.
This article discussed CVS Caremark. A previous article discussed Walgreens.
CVS Caremark [NYSE:CVS] Dec. 23, 2008 price: $26.52
52-week range: $23.19 (Nov. 21, 2008) - $44.29 (Jun. 5, 2008)
Yield = $0.069 quarterly = 1.04%
After recently closing on the acquisition of Longs Drugstores, CVS is now the largest integrated provider of pharmaceutical services. They fill over one billion prescriptions annually with over 6200 locations in 40 states. Their pharmacy benefits division is a leader in its field nicely complimenting the retail drugstores. 2008 revenues should exceed $86 billion and 2009 sales are projected to be almost $94 billion with the full year’s contribution from the former Longs units.
CVS shares have been knocked down from an all-time high of $44.29 last June to just $26.52 today despite the company’s excellent operating results.
The year wrapping up next week will be the seventh straight year with higher EPS and the fifth consecutive year with an increased dividend.