Disappointing Walgreens (WAG) Earnings Cause Break of Accelerated Uptrend

By Jeffrey Moraes and John Darsie, T3Live Jun 25, 2013, 4:34 PM 

Walgreen Co. (NYSE:WAG): The drugstore chain reported fell short of both bottom-line EPS expectations and top-line revenue estimates in its earnings report this morning, and the stock is down more than 6% this afternoon as a result. The stock opened lower on the weak report and has continued lower during the session, although as of 3PM it is trading slightly off lows of the day.

EPS Results

Actual $0.85 vs. Expected $0.91
Grew 18.06% year-to-year
Revenue Results
Actual $18.31B vs. Expected $18.43B
Grew 3.16% year-to-year
Revenue decreased 1.79% from Q2

Guidance

EPS Q3 2013: Actual $0.81 vs. Expected $0.82
Earnings per share in the current fiscal year: Actual $3.27 vs.$3.27 (Unchanged)

Key Takeaways from Conference Call

CEO Greg Wasson: “This quarter we continued to see a strengthening in our pharmacy performance as we maintained strong margins and increased our retail pharmacy market share from 18.4 percent to 19.2 percent year over year. This, in combination with our focus on cost control, and the contribution from Alliance Boots and related synergies, resulted in adjusted earnings per diluted share growth of 18.1 percent in the quarter.”

Taking a Look at the Chart

Pattern: Long-term uptrend intact, accelerated uptrend broken

After trading in a sideways trend for most of the 2000s, Walgreens (WAG) has been in a steady uptrend since the market bottomed in March 2009. The most impressive move in WAG, though, has taken place since the market reversal on November 16, 2012. Since that day leading up to this morning’s earnings report, the stock entered an accelerated uptrend and gained more than 50%. However, today’s 6+% sell-off will cause WAG to violate that steep uptrend. Short-term composure now becomes much more cautious, while the stock still sits firmly in a long-term uptrend.

(click to enlarge)

Potential Sympathy Trades – Stocks in the Same Sector

CVS Caremark Corp, (NYSE:CVS)
GNC Holdings Inc., (NYSE:GNC)
PharAmerica Corporation. (NYSE:PMC)
Rite Aid Corporation (NYSE:RAD)

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