February 8, 2018

WBA – Market expectations are for Uniform ROA to remain stable at current peaks, but management has concerns about strategic partnerships, European markets, and growth


    • Walgreens Boots Alliance, Inc. (WBA:USA) currently trades around corporate averages relative to UAFRS-based (Uniform) Earnings, with a 20.0x Uniform P/E, implying somewhat bullish expectations for the firm. However, management has concerns about strategic partnerships, European markets, and growth
    • Specifically, management may be concerned about their reduced stake in their main wholesale partner in China, and may be exaggerating the benefits they are seeing from the upgrade of the existing Walgreens business model in pharmacy and in retail. Furthermore, they may be concerned about their strategic partnership with FedEx, and may also be concerned about operations in European markets due to Brexit and governments pushing down margins for pharmacies. Moreover, they may lack confidence in the sustainability of sales growth, as well as expectations for slower declines in comparable retail sales. Finally, they may be exaggerating how well their beauty offering has been received, and may also be exaggerating their satisfaction regarding their clinic partnerships

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