Evrcore ISI Boosts PT on Walgreens Boots (WBA) to $95; Confidence in Management is Increasing

Evrcore ISI affirms Walgreens Boots Alliance (Nasdaq: WBA) at Hold and boosts its price target from $94 up to $95 following Q3 results and other matters announced by the company on Thursday.

Analyst Ross Muken commented, WBA continued to exceed ST expectations, posting solid margin progression across both legacy WAG and AB business units, while also executing against a multi-year restructuring plan. We have incremental confidence in management’s ability to inflect the margin profile of the business and are also impressed with the improved top-line pacing at base WAG (quite a difficult task to keep sales growth elevated while restructuring – kudos to the new management team). Our more optimistic view of the WBA EPS glide-path is now reflected in our EPS estimates, where our outyear forecast is now substantially above the ST. Our only hesitance regarding a more constructive stance is valuation, where shares trade north of 20x calendar ’15 EPS. Furthermore, we are unsure of how to handicap management’s approach to capital allocation, which we view as necessary to drive material outperformance going forward. Ultimately, our view here continues to be more positive relative to fundamentals, but we await a better entry point to become more constructive on the equity.Thus we reiterate our Hold rating.

Estimate changes: FY15 EPS from $3.75 to $3.90, FY16 from $4.50 to $4.60 and FY17 from $5.65 to $5.80.

For an analyst ratings summary and ratings history on Walgreens Boosts Alliance click here. For more ratings news on Walgreens Boosts Alliance click here.

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