Coinstar (NASDAQ: CSTR) offers North American and U.K. retailers a range of storefront service and entertainment devices. These include coin counters, kiddie rides, bulk vending machines, skill-crane games and point-of-sale terminals. The firm also provides self-service DVD movie rental/purchase kiosks and provides money transfer services, prepaid wireless products, stored value cards, payroll cards and prepaid debit cards. Coinstar products and services are distributed through more than 53,000 retail stores. Corporate clients include Wal-Mart (NYSE: WMT), Kroger (NYSE: KR) and Walgreen (NYSE: WAG).
The company surprised the Street last week, when it reported Q1 EPS of 18 cents and revenues of $190.5 million. Analysts had been expecting four cents and $182.7 million. Management also guided Q2 EPS to 8-15 cents (12 cent consensus), Q2 revenues to $200-$210 million ($202.19M consensus), FY08 EPS to 60-75 cents (57 cent consensus) and FY08 revenues to $850-$900 million ($829.83M consensus). DA Davidson subsequently upgraded the stock to "buy".
"Shares of Walgreen (NYSE: WAG) have come under pressure in recent months, reflecting a slowdown in sales because of a weakening economy and intensifying competition," notes Richard Moroney.
The editor of Dow Theory Forecasts adds, "However, Walgreen's long-term prospects remain appealing, and the stock is attractively valued. Walgreen is a Long-Term Buy." Here is his review.
"Big, strong, and healthy, Walgreen is the largest U.S. drugstore chain as measured by revenue and the second-largest based on store count.
"The company operates more than 6,200 stores in 48 states and Puerto Rico and plans to boost the count to 7,000 by fiscal 2010 ending August. Walgreen sees long-term potential for about 13,000 U.S. stores. Prescriptions generate about 65% of total sales, with the rest coming from general merchandise.
"In fiscal 2007, both pharmacy and general merchandise sales growth outpaced the industry average, and Walgreen increased market share in nearly all of its core categories.
"Socially Responsible Investing (SRI) is no longer relegated to a tiny corner of the investment landscape; indeed, according to the Social Investment Forum, SRI now accounts for $2.7 trillion, up more than 18% since 2005," says Chuck Carlson.
Here, the editor of The DRIP Investor offers five stock that both rank high for their social responsibility and also stand out based on more traditional earnings and valuation analysis.
"The Social Investment Forum estimates that more than one in every 10 dollars under professional management in the U.S. is involved in SRI investing. What is driving the growth in SRI?
"One factor is the increasing numbers of women and younger investors among the investor populace have fueled demand for SRI investments.
"In addition, we see an increased focus on environment, social, and corporate governance issues. Further, widely publicized stories concerning global warming as well as various corporate governance issues, have caused many investors to reconsider how they deploy their investment capital.
Financial Stocks to Love The subprime mortgage meltdown and resulting credit crisis have slammed financial stocks recently. But there are still some diamonds in the rough. They include Berkshire Hathaway, RBS, AFLAC, Raymond James and BOK. Financial stocks we love - CNNMoney.com
Big Mac's Local Flavor Once vilified for pushing America on the world, McDonald's lets countries invent their own buns, bags, and business practices. Now some ideas are making their way back home. Big Mac's local flavor - FORTUNE
CVS Caremark (NYSE: CVS), a big competitor of both Walgreen (NYSE: WAG) and Rite Aid (NYSE: RAD), released its Q1 earnings last week. They were very good, and they reminded me that I probably need to throw a drugstore chain's stock in my core portfolio as a long-term play on the increasing health-care needs of the baby boomers (and every other demo, for that matter).
Looking through the reported growth rates, you can see that we're talking best-of-breed here. Revenues were up over 60%, and adjusted earnings per share increased over 18%, coming in at $0.55. The Caremark merger has obviously proven to be a good move. Same-store sales rose 3.9%, benefited in part by the early appearance of Easter in March.
According to earnings.com, CVS Caremark basically matched earnings expectations. That's okay, though, I don't think you can hold it against this big brand name. As of this writing, CVS is near a 52-week high. Buying at the 52-week high is always a dicey thing, but if you plan on holding for years, it wouldn't be that much of a concern. Shorter-term traders would need to wait for a pullback. But I like the first quarter results for CVS, and I think the stock is poised to do well over time. And like I said at the beginning, this really may be a stock for the core portion of an individual's investment program -- a true buy-and-hold idea.
Disclosure: I don't own shares in any company mentioned here; positions can change at any time.
This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.
CVS Caremark Corp (NYSE: CVS) -- with 6,200 stores and a pharmacy benefits management division -- beats Walgreen Co. (NYSE: WAG) -- with 5,997 stores -- hands down in the battle of the brands. It's bigger, its earnings are growing faster, it has a higher P/E and its stock has grown faster over the last year and five years. Walgreen wins on one measure: it has a fatter profit margin.
Rite Aid (NYSE: RAD), I should disclose, is one of my least favorite companies and stocks. Nevertheless, I don't mind checking in on it from time to time when there is news about it. Yesterday, the pharmacy released sales data for the month of March (the data excludes the Brooks Eckerd acquisition). Did they change my outlook on Rite Aid at all?
No, although I should say that this wouldn't be necessarily expected; a month of same-store sales data isn't the killer app of an overall investment thesis for a retail idea. Still, shareholders follow comps religiously, and I have to say that Rite Aid's number was nothing to write home about. A 2.6% gain in sales at stores open more than a year is weak. Walgreen (NYSE: WAG) said earlier in the week that its comparable-store revenues grew by a much better 4.4%. Walgreen was able to take advantage of the Easter shopping excitement in a much better fashion than Rite Aid. It all comes down to brand and execution; Walgreen, as well as CVS Caremark (NYSE: CVS), are more valuable in terms of both those attributes.
I may not have been bowled over by Walgreen's recent earnings release, but I can tell you that Rite Aid's share price is downright frightening and telling -- it's telling people to stay away, or at least understand that it may be essentially like buying a lottery ticket (it closed at $2.89 yesterday). Rite Aid's same-store sales were weak, and so is its investment potential.
Disclosure: I don't own shares in any of the companies mentioned here; positions can change at any time.
Luqman Arnold, the former UBS AG (NYSE: UBS) president forced out in 2001, wants the firm to split its investment bank from the private client bank, and look at selling the investment bank and asset management business, according to the Wall Street Journal's "Heard on the Street".
The Financial Times reported that the landmark merger that created Citigroup Incorporated (NYSE: C) was a "mistake" that failed to benefit the financial services giant's investors, customers and employees, said John Reed, who masterminded the $166B deal with Sandy Weill in 1998. Reed, the former head of Citicorp, has advised Citigroup CEO Vikram Pandit at least to consider spin-offs, sources said.
WEB SITES:
Walgreen Co (NYSE: WAG) is branching out by acquiring two companies that provide health-care services, BusinessWeek reported, following in its competitor CVS Caremark Corporation's (NYSE: CVS) shoes. Some investors are wary of Walgreen's move, but Mark Wiltamuth of Morgan Stanley sees it as a new growth avenue and as a push into services complementary to drugstores.
Walgreen Company (NYSE: WAG) reported earnings for the second quarter on Monday. Net sales grew by a very decent 10%. Diluted earnings per share for the quarter were $0.69 versus $0.65 in the year-ago period; this represents a bottom-line gain of 6%.
Considering some of the other action on Wall Street on Monday -- the increased offer for Bear Stearns, the approval of the Sirius/XM merger -- Walgreen's earnings report was simply an okay event, even though the stock closed up around 5% on the news. Same-store sales may have increased 4.7%, but the retailer sold a lot of items with lower margins this time around, thus reducing its gross-margin metric by 14 basis points (the release did cite a big shift to pharmacy sales in the quarter as having negatively impacted margins). So Walgreen needs to work on its non-pharmacy revenues. One cool thing from the report is the jump in net cash from operations -- that number increased by 10%.
Walgreen, which competes with CVS Caremark Corporation (NYSE: CVS) and Rite Aid Corporation (NYSE: RAD), isn't a bad way to play the long-term drug-retailing business. To be sure, baby boomers -- as well as everyone else -- will always need to visit drugstores on a go-forward basis. It's the company that can capture a significant amount of non-pharmacy sales that will prosper the most. Walgreen and CVS are excellent brand names in this sector -- I'm not so keen on Rite Aid, though (take a look at the stock price and see if you think the company might be cheap-for-a-reason, as they say).
Disclosure: I don't own any shares in any of the companies mentioned here; positions can change at any time.
The result? Wall Street is rising, with the Dow industrials climbing over 200 points (211 as I write this). The broader S&P 500 is not shying from the rally either, soaring 1.8%, and the Nasdaq composite is up a cool 2.75%.
It is no surprise then to find that Wal-Mart Stores Inc. (NYSE: WMT) actually set a new 52-week high today, climbing to $54.15 before settling back a bit at $53.76, or 1% higher. While no specific news is driving Wal-Mart at the moment, its stock has seen nice price movement lately, as many have bet the discount retailer would fare well in a slowing economy / recession.
Theflyonthewall.com believes that the breakout is technical, saying that after the $51.50-$52 level served as a "major overhead resistance area for 3 years and was a major support area for the 2 years prior," WMT could break out if it climbed above that level. Not only that, but "breakouts of this type, which have developed over a long period of dull range trading, often produce extreme and persistent movement in the direction of the breakout." Meaning, that if the stock doesn't revert back, we could see WMT shares gain strong upward momentum.
While perhaps not breaching 52-week records, other retailers are performing well today too. Continued falling commodity prices have eased inflation concerns, putting retailers back in favor. Target (NYSE: TGT) shares are climbing nearly 2.5%; Walgreen (NYSE: WAG), which has reported a 5% earnings growth, is seeing its shares rise over 5.3%; and Family Dollar (NYSE: FDO), another discount store, is soaring over 6%.
Some believe the current financial crisis is the most serious since the Great Depression and if so some of the largest companies in the country could be taken over and cease to be independent public corporations. Huge firms with vulnerable businesses, competitive pressures, and weak balance sheets may end up being takeover targets. Here is 24/7 Wall St.'s predictions of possible takeovers that could happen in the near future if the current crisis persists. They include McDonald's buying Wendys, VW acquiring Ford Motor, Wal-Mart getting Sears, Wells Fargo buying out Washington Mutual, J&J nabbing Boston Scientific and more.
Leading drug store chain Walgreen Co. (NYSE: WAG) and upscale specialty retailer Tiffany & Co. (NYSE: TIF) are scheduled to report earnings tomorrow. Here's a quick peek at them ahead of results.
Walgreen has beat earnings estimates in four of the past five quarters. When the company reported first-quarter results back in November, earnings came to 46 cents per share, two cents less than the consensus forecast of analysts polled by Thomson Financial, and up from the 43 cents in the same period of the previous year. For the current quarter, analysts expect 67 cents per share, compared to 65 cents in the year-ago quarter.
The company's earnings per share growth forecast for this year is 9.42%, which is better than the industry average but less than the 30.68% of rival CVS Caremark Corp. (NYSE: CVS). The analysts' consensus recommendation is to hold Walgreen, and has been for the past three months. Shares have risen since hitting a 52-week low of $32.50 in January, and closed Friday at $36.78.
For news about Walgreens that could influence the earnings results, see BloggingStocks' Walgreen coverage.
Walgreen (NYSE: WAG) closed at $36.78. WAG is expected to report Q2 EPS on March 24. Goldman Sachs says, "We continue to prefer Buy-rated CVS in the space, due to its superior operating momentum and greater undervaluation, but WAG is increasingly compelling." WAG April option implied volatility of 32 is near its 26-week average of 29 according to Track Data, suggesting non-directional risk.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
North American and U.K. retailers a range of storefront service and entertainment devices. These include coin counters, kiddie rides, bulk vending machines, skill-crane games and point-of-sale terminals. The firm also provides self-service DVD movie rental/purchase kiosks and provides money transfer services, prepaid wireless products, stored value cards, payroll cards and prepaid debit cards. Coinstar products and services are distributed through more than 53,000 retail stores. Corporate clients include Wal-Mart (NYSE: WMT), Kroger (NYSE: KR) and Walgreen (NYSE: WAG).
CVS Caremark
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