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Walgreens Boots Alliance (WBA) Will Be Fine, Rite Aid or Not

By U.S. News & World Report

Investors and analysts who are interested in drugstores and retail stocks will likely be keeping an eye on Walgreens Boots Alliance (ticker: WBA) this week in hopes of an update on its ever-dragging will-it-or-won’t-it merger with No. 3 player, Rite Aid Corp. ( RAD).

And while they might walk away disappointed, this week’s quarterly earnings statement should give investors some comfort that WBA stock will be just fine, regardless of how the Rite Aid merger plays out.

The headline numbers. While the Rite Aid merger continues to be a hotbed of uncertainty, that hasn’t affected actual operations of Walgreens, the country’s second-largest drug store chain by revenues.

Fiscal second-quarter earnings that are being reported on Wednesday are expected to be a little on the lean side — Wall Street believes WBA will grow earnings 3.8 percent to $1.36 per share on revenues that will inch higher by 10 basis points to $30.22 billion. However, that looks more like a speed bump amid a more promising full-year 2017 in which Wall Street expects a bottom-line improvement of 9 percent to a flat $5 per share on a 1.5 percent uptick to $119 billion on the top line.

[See: 10 Best Dividend Stocks to Buy.]

If you want to look that far ahead, 2018 is even sunnier, with analysts expecting 10.6 percent profit growth on 4.4 percent sales improvement.

One big expected driver for Walgreens’ business was a deal announced in December 2016 by the Department of Defense’s health care program Tricare — and that deal did not include rival CVS Health Corp. ( CVS).

Walgreens did not disclose what exactly the arrangement would mean in terms of business clawed away from CVS, but we received at least a hint a month earlier from a CVS Health announcement. Specifically, CVS in its Q3 release warned about a “loss of more than 40 million retail prescriptions related to new restricted pharmacy networks.” That resulted in CVS shares plunging roughly 12 percent in a single day.

Regardless, it should be a boon for Walgreens, and at least one analyst agrees. Baird’s Eric Coldwell updated its outlook on WBA stock recently, which included a hike to earnings estimates from $1.30 per share to $1.36, in part because of the Tricare start. However, the company’s expectations for $29.7 billion in revenues is actually below the Street consensus.

Instead, Baird’s bullishness is on the second half of the year. “In addition to Tricare, OptumRx 90-day at retail and Prime preferred network agreements (Prime specialty pharmacy combination still to come) should layer into results,” Coldwell says.

Let’s make a deal? On the Rite Aid front, Walgreens provided us with one of the juicier bits of deal-related info that we can expect for a while: Namely, WBA has “started the clock.”

The New York Post reported on Friday that Walgreens set a deadline of three months for the Federal Trade Commission to either approve the deal or block it. It’s a mostly political gambit on the part of WBA, with the drugstore chain betting that President Donald Trump will install a friendly face as head of the FTC by the time the deadline has passed.

[See: 6 ETFs That Let You Buy Micro-Cap Stocks.]

And, as the Post pointed out, “such declarations of so-called ‘certified compliance’ … also prevent the commission from ruling well ahead of the deadline.” In other words, Walgreens has already drawn a line in the sand, and it’s unlikely the FTC will rule while WBA is reporting earnings, so additional deal news might be thin and awfully repetitive.

But optimism over a deal is fading, with RAD shares down by nearly half year-to-date amid growing fears that the delays will result in a failure. It hasn’t been for a lack of trying, either — Walgreens in late January said it would divest more stores than the original 865 Rite Aid locations it planned to hand over to Tennessee-based Fred’s ( FRED). In the same announcement, Walgreens said it would pay at least $2 less per share of RAD stock than its original $9 offer.

Baird assumed 1,200 store divestitures in its note, in which it still believed the deal would close, but not until Aug. 1. That came out just days before Walgreens’ timetable announcement, however. For now, Baird is assuming no earnings accretion for this year even if the RAD deal does go through, and cut 2018 estimates in half.

More Earnings in Focus

Monsanto Co. (MON). Monsanto, like Walgreens, reports fiscal second-quarter earnings before Wednesday’s bell, and like Walgreens, everyone is far more interested in whether a pending merger will go through. In this case, MON is the prey, and German chemical and health care conglomerate Bayer AG is the hunter. While Bayer began to court Monsanto in May, the two didn’t agree to a $66 billion merger until September 2016. That also faces regulatory scrutiny; however, Bayer is plying President Donald Trump with big spending and job creation in the U.S. For the record, Wall Street expects a decent quarter out of Monsanto — 4.3 percent top-line growth to $4.73 billion, and 15 percent bottom-line growth to $2.79 per share.

[See: 20 Dividend Stocks for Guaranteed Income.]

Bed Bath & Beyond (BBBY). Home decor seller Bed Bath & Beyond continues to be caught in a multiyear slump. Shares are off more than 50 percent from all-time highs in early 2015 — a likely driver behind BBBY initiating a 12.5-cent quarterly dividend roughly a year ago. However, if Bed Bath really is committed to keeping value and income investors interested, this quarter’s earnings report on Wednesday will have to include a hike to that regular payout, which it can afford given a single-digit payout ratio. On the earnings front, analysts expect the same weakness out of BBBY that has been plaguing the retail industry — sales growth of just 2.5 percent to $3.42 billion, and a 7.3 percent contraction in profits to $1.77 per share.

This Week’s Earnings Calendar

Tuesday. Conn’s ( CONN)

Wednesday. Yum China Holdings ( YUMC)

Thursday. CarMax ( KMX), Constellation Brands ( STZ), PriceSmart ( PSMT), WD-40 Co. ( WDFC)

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Walgreens Boots Alliance (WBA) Will Be Fine, Rite Aid or Not originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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