Walgreen Blows through Expectations- CVS is today’s play.
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.
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.
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