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Walgreens Trailed the Dow in 2019 and Needs Help in 2020


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Eight days into 2020, Walgreens Boots Alliance777彩票地址 will become the second S&P 500 company to report earnings.

777彩票地址Don’t expect much. In 2019, the stock was the worst performer in the Dow Jones Industrial Average, losing 14%, while the broader index gained 23%. Things don’t appear a lot brighter for the health care giant in 2020.

Unlike rival CVS Health, which owns a large health insurer and pharmacy-benefit manager, Walgreens is primarily a retail pharmacy chain, a business that appears susceptible to disruption from Amazon.com and other emerging online drug fillers.

777彩票地址In fiscal 2019, Walgreens sales were sluggish, growing only 4% from the previous year. As insurers cut reimbursement rates to drug retailers, margins compressed, despite cost cutting and store closures. Earnings per share fell slightly from fiscal 2018.

Share prices did pop in November amid hopes that private-equity behemoth KKR was considering taking the drugstore chain private in a leveraged buyout, but most of those gains were erased after skeptics pointed out that Walgreens sheer size makes the deal difficult to pull off. Walgreens remains public.

777彩票地址Without near-term catalysts in sight, Wall Street isn’t looking for much from Walgreens in the first quarter of fiscal 2020 ended in November. Sales are expected to grow 2.4% to $34.6 billion, and earnings per share to shrink 3.4%, from the year-ago period, to $1.41 per share. For 2020 to look different than 2019, Walgreens will need some big changes to give shareholders hope again. Ideas?

Next Week
A Very Good Year

777彩票地址777彩票地址 soared in 2019, with the Dow industrials finishing up 22.3% for the year; the S&P 500, 28.9%; and the Nasdaq a rousing 35.2%. Housing strengthened, manufacturing weakened, and consumers spent. Shares outpaced earnings growth, and there were signs that rising labor costs might be squeezing margins. Inflation hung just below 2%. On the week, China stimulus drove stocks to new highs on Thursday, then slipped on Friday’s Middle East turmoil. The Dow closed at 28,634.88, off 0.04%; the S&P 500 at 3234.85, down 0.2%; and the Nasdaq at 9020.77, up 0.2%.

Escalation in Iraq

A U.S. drone strike killed Iranian General Qassem Soleimani, leader of the Quds Force, in a convoy near Baghdad International Airport. The Department of Defense claimed that Soleimani was planning attacks on U.S. forces and diplomats in Iraq. Also killed: top Iraqi paramilitary leader Abu Mahdi al-Mohandes. The airstrike was an escalation from a rocket attack that killed a U.S. contractor in late December, which resulted in a U.S. airstrike that killed 25 Iran-backed Iraqi militia, triggering a mob that stormed the U.S. embassy in Baghdad. Iran promised “severe revenge” for Soleimani’s death. Israel went on high alert. Oil prices surged.

Trade: The Final Details

777彩票地址Chinese Vice Premier Liu He flew to Washington to complete the phase-one trade deal between the two countries. A signing ceremony will take place on Jan. 15 at the White House. President Trump says he will begin phase-two talks later in Beijing. Full details of the deal have still not been released.

Ghosn’s Great Escape

Former Renault, Nissan, and Mitsubishi chief Carlos Ghosn disappeared from Japan, where he was awaiting a trial on charges of financial misconduct, and emerged in Lebanon, where he grew up, apparently changing planes in Turkey. Ghosn, a citizen of France, Brazil, and Lebanon, was pressing for closer ties between Nissan and Renault when he was arrested in Japan, and periodically jailed, interrogated, and indicted. Lebanon has no extradition treaty with Japan, which seized Ghosn’s $14 million bail.

Trouble With Fracking

The Wall Street Journal reported that forecasts of oil and gas production from fracking look increasingly suspect. The paper collected estimates from 29 shale producers from 2014 to 2017 and compared them to estimates from public data. Earlier in the year, the WSJ reported that four major frackers overshot by some 10%; producers now look like they missed the target by 15%.

Australia Burning

The DOL releases the monthly jobs report for December. Consensus estimates are for a 157,500 gain in nonfarm payrolls and for unemployment to remain steady at 3.5%.

Wildfires blasted Australia’s southeast coast, forcing widespread evacuations and straining firefighting resources. The government warned of record-breaking heat, with Australia’s summer, and fire season, just starting.

Write to Evie Liu at evie.liu@barrons.com


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