Drugstore Chain Walgreens Shares Soar Over 8% After Q1 Earnings Top Estimates

The largest U.S. drugstore chain Walgreens Boots Alliance reported better-than-expected earnings in the fiscal first quarter and remained broadly consistent in its full-year forecast for earnings growth, sending its shares up over 8% on Thursday.

Walgreens Boots Alliance said its sales increased 5.7% to $36.3 billion in fiscal first quarter ended November 2020, up 5.2% on a constant currency basis. Loss per share was $0.36, compared to EPS of $0.95 in the year-ago quarter, including a $1.73 per share charge from the company’s equity earnings in AmerisourceBergen.

Adjusted EPS decreased by 11.2% to $1.22, down 11.6% on a constant currency basis, reflecting an estimated adverse COVID-19 impact of $0.26 to $0.30 per share. But it beat analysts’ expectations of $1.03 per share.

“Walgreens Boots Alliance (WBA) reported adj. EPS of $1.22, vs. consensus of $1.03. We look for details around the better than expected results in Retail Pharmacy USA and Retail Pharmacy Int’l. FY21guidance was maintained but now skewed positively. Mgmt now expects to see a greater impact from COVID-19 in F2Q, and we look for an update to mgmt’s COVID-19 recovery assumptions,” said Charles Rhyee, equity analyst at Cowen and company.

Drugstore chain maintained its fiscal year 2021 guidance, but with the profile skewed positively. The company continues to forecast expects adj. EPS of low single-digit growth, roughly in-line with consensus of $4.81, which implies growth of +1.5% y/y.

Walgreens forecasts to see a higher adverse impact from COVID-19 in the fiscal second quarter but continues to expect F1H21 adj. EPS to decline 17%-23%, broadly consistent with prior expectations. On a full-year basis, the impact of COVID-19 vaccines is likely offset by COVID-19 related lockdowns and increased growth investments.

Walgreens Boots Alliance shares soared over 8% to $46.48 on Thursday. However, the stock fell over 30% in 2020.

Walgreens Boots Alliance Stock Price Forecast

Seven analysts who offered stock ratings for Tiffany & Co in the last three months forecast the average price in 12 months at $41.20 with a high forecast of $44.00 and a low forecast of $40.00. The average price target represents a -10.47% decrease from the last price of $46.02. All those seven equity analysts, none rated “Buy, six rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $40 with a high of $46 under a bull scenario and $27 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the pharmacy provider’s stock.

Several other analysts have also recently commented on the stock. Truist Securities raised the price target to $44 from $40. Citigroup upped their price objective to $45 from $40. Cowen and company lowered the stock price forecast to $41 from $46. Deutsche Bank raised the price target to $41 from $40. UBS lowered the target price to $41 from $42.

Analyst Comments

“Walgreens Boots Alliance operates a top 2 retail pharmacy chain in the US as well as Boots Pharmacy and Alliance drug distribution in Europe. With COVID-19 disruption likely to weigh on results for the first part of FY21, at the least, along with ongoing structural reimbursement pressure, EBIT and EPS growth will likely be constrained for the foreseeable future, said Ricky Goldwasser, equity analyst at Morgan Stanley.

“Walgreens has the balance sheet to deploy capital into M&A, as well as the strategic optionality to potentially reposition its portfolio of assets in a changing healthcare marketplace. Unveiling a new strategy under a new CEO that provides a roadmap to future growth is a potential catalyst for shares.”

Check out FX Empire’s earnings calendar

Walgreens Perfect Play for the January Effect

Dow component Walgreens Boot Alliance Inc. (WBA) reports Q1 2021 earnings in Thursday’s pre-market session, with Wall Street analysts expecting a profit of $1.04 per-share on $35.01 billion in revenue. If met, earnings-per-share (EPS) will mark a 24% profit decline compared to the same quarter in 2019. The stock ticked higher after beating Q4 top and bottom line estimates in October and has added a few more points into January 2021.

Waking Up from the Dead

The drug chain is one of the Dow Industrial’s worst long-term performers, losing nearly 40% since it was added to the Average in June 2018. It posted a stomach-churning negative 32% return in 2020 but that’s now good news because the stock has become an attractive January Effect buying candidate. It’s also starting to wake up from the dead, just announcing a key divestiture and partnership intended to shore up a troubled balance sheet.

AmerisourceBergen (ABC) will acquire the majority of Walgreens’ Healthcare businesses for $6.275 billion and two million ABC shares. In addition to the acquisition, the companies will strengthen their “strategic partnership by extending and expanding their commercial agreements”. The current distribution agreement will be extended to 2029 while the partnership includes a “commitment to pursue additional opportunities in sourcing and distribution”.

Wall Street and Technical Outlook

Wall Street consensus is as bad as it gets for a Dow component, with a ‘Hold’ rating based upon 6 ‘Hold’ and 1 ‘Sell’ recommendation. Not one analyst is recommending that investors buy Walgreens at this time. Price targets currently range from a low of $40 to a Street-high $44 while the stock has opened Wednesday’s U.S. session less than $1 above the median $41 target. These targets and ratings are likely to change after tomorrow’s quarterly confessional.

The stock topped out in the 90s in 2015 and lost two-thirds of its value into October’s 8-year 2020 low at 33.36. Accumulation fell to a two-year low at the end of December, highlighting persistent investor mistrust. However, price is acting well at 200-day moving average resistance, trading above that barrier four times since Nov. 10. This persistence is paying off, establishing the first monthly Stochastic buying signal since Sept. 2019.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Earnings to Watch Next Week: Carnival, RPM, Constellation Brands and Walgreens Boots Alliance in Focus

Earnings Calendar For The Week Of January 4

Monday (January 4)


Carnival, the world’s largest cruise ship operator, is expected to report a loss for the third consecutive time in the fourth quarter. The Miami, Florida-based company’s revenue will plunge ​nearly 100% to $142.09 million from $4.78 billion posted in the same period a year ago. Carnival is expected to report a loss of $1.84 per share, worse compared to a profit of 62 cents per share registered in the same quarter last year.

“We think the cruise industry will be one of the slowest sub-sectors to recover from the COVID-19. Cruising needs just not international travel to return, but ports to reopen, authorities to permit cruising, and the return of customer confidence,” said Jamie Rollo, equity analyst at Morgan Stanley.

“We expect cruising to resume in January 2021, and only expect FY19 EBITDA to return in FY24 given historically CCL has lacked pricing power, and EPS to take even longer given dilution of share issues and higher interest expense. We see debt doubling in FY21 vs FY19 due to operating losses and high capex commitments, and leverage looks high at 4-5x even in FY23-24e, so we see risk more equity might need to be raised,” Rollo added.

According to the mean Refinitiv estimate from eleven analysts, Carnival Corp is expected to show a decrease in its fourth-quarter earnings to -186 cents per share. Wall Street expects results to range from a loss of $-2.10 to ​a loss of $-1.64 per share, Reuters reported.

Tuesday (January 5)

No major earnings scheduled for release.

Wednesday (January 6)


RPM International, manufacturer of specialty chemical product lines, including high-quality specialty paints, protective coatings, roofing systems, sealants, and adhesives, is expected to report a profit of $1.0 in the fiscal second quarter of 2021, up from $0.76 reported in the same quarter last year.

The specialty chemicals company’s revenue could grow more than 4% year-on-year to $1.46 billion.

“Nearly 1/3 of sales are related to U.S. housing and home improvement (the second highest in the industry behind Sherwin-Williams). This continues to be our preferred coatings end market as it benefits from COVID-19 driven home improvement demand, which we think is sustainable. Importantly, RPM has no meaningful auto, aerospace exposure, but does have US infrastructure/construction exposure which could benefit from stimulus policy,” noted Vincent Andrews, equity analyst at Morgan Stanley.

“RPM’s MAP self-help program offers an offset to COVID-19 challenges. Meaningful opportunity remains for improvement in margins, free cash flow conversion, and return of capital to shareholders. Management highlighted upside to MAP targets on the recent conference call,” Andrews added.


Ticker Company EPS Forecast
RPM RPM International $1.00
MSM MSC Industrial Direct $1.08
UNF UniFirst $1.68
AUOTY AU Optronics $0.09

Thursday (January 7)


CONSTELLATION BRANDS: New York-based Fortune 500 international beverage alcohol company is expected to report a profit of $2.40 in fiscal third quarter, up from $2.14 per share seen in the same quarter a year ago, which would indicate a positive year-over-year growth rate of more than 12%.

The leading beverage alcohol company’s revenue could grow more than 12% year-on-year to $2.26 billion.

“We believe the focus of Constellation Brands’ FQ3 EPS will be on accelerating and above consensus beer depletions to +8.3% y-o-y in FQ3 (vs. 5% in F1H21) with improving beer out-of-stocks, as well as a beer shipment recovery after the under-shipment in F1H21. We also expect an update on beer depletion trends in December, with solid U.S. scanner data trends but likely weakening on-premise trends with more on-premise restrictions, particularly in California (about a quarter of Constellation Brands’ volumes),” said Dara Mohsenian, equity analyst at Morgan Stanley.

“Additionally, we believe investors will focus on beer margins, which we believe could surprise to the upside in FQ3 (we are 20 bps above consensus on beer margins and 2.3% above consensus on beer profit) and in F2H21, with Constellation Brands full year FY21 guidance of flat beer margins implying -160 bps of y-o-y margin declines in H2, with our estimates above guidance at -20 bps y-o-y,” Mohsenian added.

WALGREENS BOOTS ALLIANCE: The largest U.S. drugstore chain is expected to report a profit of $1.03 in fiscal first quarter ended November 2020, representing a year-over-year plunge of -25.6%. The retail pharmacy provider’s revenue could grow about 2% year-on-year to $34.93 billion.

“When Walgreens provided 2021 guidance back on October 15th, management didn’t include any negative impact from additional lockdown measures in Europe or changes to utilization patterns in the US including higher demand for flu vaccines in 1Q but softer demand for cough, cold, and flu products. To reflect how the environment has changed, we have updated our estimates. For 1Q, we now model EPS of $0.98 from $1.14 prior and versus consensus’ $1.03 (range $0.97 – $1.08). Our changes are primarily driven by our estimate of international retail segment sales down -20% y/y and -4.5% sequentially,” said Ricky Goldwasser, equity analyst at Morgan Stanley.

“While we are lowering our 2021 estimate to $4.55 from $4.70, our numbers include only the additional hiring of pharmacy technicians throughout the year but not the benefit associated with administrating the vaccines to the general populations. We think the benefit could be as high as a $1.00 – $1.40 split between 2HF21 and 1HF22. In comparison, the consensus is $4.82 and guidance of low single-digit y/y growth implies a $4.78 to $4.87 range.”


Ticker Company EPS Forecast
STZ Constellation Brands $2.40
WBA Walgreens Boots Alliance $1.03
CAG Conagra Foods $0.73
HELE Helen Of Troy $3.01
AYI Acuity Brands $1.83
BBBY Bed Bath & Beyond Inc. $0.17
MU Micron Technology $0.69
DCT DCT Industrial Trust -$0.01
WDFC Wd 40 $0.87
PSMT PriceSmart $0.67

Friday (January 8)

No major earnings scheduled for release.

Nasdaq Hits Yet Another Record Close

The major indices closed mixed on Wednesday (Dec. 16), as the Nasdaq hit yet another record close amidst stimulus optimism and the Fed’s dovish tone.

News Recap

  • Although the Dow Jones closed lower by 44.77 points, or 0.15%, the S&P 500 gained for the second day in a row and rose by 0.18%. The Nasdaq closed once again at a record high and gained 0.5%.
  • Sentiment for the day started negatively after the Commerce Department reported a steeper-than-expected drop in U.S. retail sales. The department stated that retail sales fell by 1.1% in November compared to estimates of 0.3%.
  • Cautious optimism that some sort of stimulus could be passed before the end of the year encouraged investors.
  • According to Politico , Congress was on the brink of a $900 billion stimulus deal that would include a new round of direct payments to consumers. However, that package would exclude the more contentious areas of liability shields for businesses and state and local aid.
  • We have reached the deadliest weeks of the COVID-19 pandemic. More than 300,000 total COVID-19 related deaths have now been confirmed in the U.S., with over 16 million confirmed cases. Additionally, US officials reported 3,400 new COVID-19 deaths – a daily record.
  • After an FDA panel officially endorsed Moderna (MRNA) – following a review which confirmed safety and efficacy earlier in the week – the big day is finally here. On Thursday (Dec. 17), the FDA will officially vote on Moderna’s vaccine. This will strongly complement the mass deployment of Pfizer (PFE) and BioNTech’s (BNTX) vaccine.
  • The Federal Reserve ’s announcement on monetary policy was largely as dovish as expected. The Fed vowed to continue its asset purchase program at the current rate, “until substantial further progress has been made toward the committee’s maximum employment and price stability goals.”
  • Microsoft (MSFT) and Salesforce (CRM) led the Dow with gains of 2.4% and 1.6%, respectively, while Walgreens (WBA) was the laggard and declined 2.15%.
  • Moderna (MRNA), despite its big week ahead, dropped 6.9%.

While there is some short-term uncertainty and mixed sentiment, there is some general consensus: While the short-term may see some pain and/or mixed sentiment, it may be worth it for the medium-term and long-term optimism.

The overwhelming majority of market strategists are bullish on equities for 2021- despite near-term risks. Outside of the pandemic raging to out of control levels, another near-term risk that has been largely overlooked is the Senate runoff election in Georgia. Investors have largely already priced in a divided government – however, if Republicans end up losing both seats in Georgia, this could potentially upend everything.

According to Jimmy Lee, CEO of the Wealth Consulting Group ,

“I think that we can get a little bit of consolidation before year-end just due to normal selling at the year-end for rebalancing or tax loss harvesting. Also, depending on where the pulse is for the Senate race in Georgia, investors might want to get ahead of that if they think that capital gains taxes may go up in the future…So that could cause some additional selling before year-end and we could get a little bit of a pullback. But I am very bullish on equities at this point. And I do think we may get a little bit more of a rotation into the economy-opening sectors.”

Meanwhile, progress on the stimulus package appears to be more optimistic than many expected in the near-term.

“The odds of a fiscal deal before year’s end have been improving,” Goldman Sachs economists led by Jan Hatzius wrote in a note Tuesday (Dec. 15). “While we had expected a smaller package to pass now with a larger package waiting until early 2021, it appears increasingly likely that most of this could pass this week.”

While markets for the rest of 2020 (and perhaps early 2021), will wrestle with the negative reality on the ground and optimism for an economic rebound, the general consensus appears to be looking past the short-term painful realities, and focusing more on the longer-term – a world where COVID-19 is expected to be a thing of the past and we are back to normal.

In the short-term, there will be some optimistic and pessimistic days. On other days, such as Wednesday (Dec. 16) (and in my opinion this will be most trading days), markets will trade largely mixed, sideways, and reflect uncertainty. Therefore, it is truly hard to say with conviction what will happen with markets in the next 1-3 months. However, if a stimulus deal passes within the next week, it could mean very good things for short-term market gains.

In the mid-term and long-term, there is certainly a light at the end of the tunnel. Once this pandemic is finally brought under control and vaccines are mass deployed to the general public, volatility will stabilize, and optimism and relief will permeate the markets. Stocks especially dependent on a rapid recovery and reopening such as small-caps should thrive.

Due to this tug of war between sentiments, it is truly hard to say with any degree of certainty whether another crash or bear market will come.

Therefore, to sum it up:

While there is long-term optimism, there is short-term pessimism. A short-term correction is very possible. But it is hard to say with conviction that a big correction will happen.

Nasdaq Hits Another Record Close – Too Good to Be True?

Is the Nasdaq’s performance since its sharp sell-off last Wednesday (Dec. 9) too good to be true? Truthfully, I don’t know. But it’s very possible – especially if shut down measurements become harsher and stricter and investors return to the “stay-at-home” trade that led markets from April through the end of October.

Additionally, I still have many concerns about tech valuations and their astoundingly inflated levels. Last week’s IPOs of DoorDash (DASH) and AirBnB (ABNB) reflect this and invoke traumatic memories of the dotcom bubble era. I believe that more pullbacks along the lines of last Wednesday (Dec. 9) could inevitably come in the short-term. Frankly, it would make me feel far more confident about initiating tech positions as well for the long-term.

Pay close attention to the RSI. While an overbought RSI does not automatically mean a trend reversal, I called keeping a very close eye on this for the Nasdaq. Last Wednesday’s (Dec. 9th) Nasdaq pullback after it exceeded a 70 RSI reflects that.

The Nasdaq has sharply rallied in the week since then. But its RSI is nearly 69. Monitor this . If the index goes on another bull-run and hits more record closes, it could surely exceed an RSI of 70 by the end of market close on Thursday (Dec. 17). I did not make a conviction call last week but I will now- if the RSI exceeds 70 this time, take profits- but don’t fully exit .

One thing I do like is how stable the volume has been this week and since the sharp sell-off last week. Stable volume is a good thing, especially if one is concerned about volatility. Low volume, especially a declining trend, means that there are fewer shares trading. Lower volume also means less liquidity across the index, and an increase in stock price volatility.

On pessimistic days, having NASDAQ exposure is crucial because of all the “stay-at-home” trade. However, positive vaccine-related news always induces the risk of downward pressure on tech names – both on and off the NASDAQ. What concerns me most are sharp sell-offs due to overheating and mania. Don’t ever let anyone tell you “this time is different” if fears of the dot-com bubble are discussed. History repeats itself, especially in markets.

It is very hard to say with conviction to sell your tech shares though. However, as I said before – if the RSI exceeds 70 again – consider selling some shares and taking profits. For now, however, the NASDAQ stays a HOLD .

For an ETF that attempts to directly correlate with the performance of the NASDAQ, the Invesco QQQ ETF (QQQ) is a good option.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.


Stock Pick Update: August 5 – August 11, 2020

The broad stock market has extended its medium-term uptrend in the last five trading days (July 29 – August 4). The S&P 500 index broke above its late July local highs along 3,280 level and it crossed the 3,300 mark. More than four months ago on March 23, the market sold off to new medium-term low of 2,191.86. It was a stunning 35.4% below February 19 record high of 3,393.52. The corona virus and economic slowdown fears erased more than a third of the broad stock market value. But the index has rallied back closer to record high again. It is currently just 2.6% below the mentioned February’s record high.

The S&P 500 index has gained 2.46% between July 29 and August 4. In the same period of time our five long and five short stock picks have gained 0.75%. So stock picks were relatively weaker than the broad stock market. Our long stock picks have gained 0.81% and short stock picks have resulted in a gain of 0.68%.

There are risks that couldn’t be avoided in trading. Hence the need for proper money management and a relatively diversified stock portfolio. This is especially important if trading on a time basis – without using stop-loss/ profit target levels. We are just buying or selling stocks at open on Wednesday and selling or buying them back at close on the next Tuesday.

If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.

This means that our overall stock-picking performance can be summarized on the chart below. The assumptions are: starting with $100k, no leverage used. The data before Dec 24, 2019 comes from our internal tests and data after that can be verified by individual Stock Pick Updates posted on our website.

Below we include statistics and the details of our three recent updates:

  • August 4, 2020
    Long Picks (July 29 open – August 4 close % change): IFF (-2.27%), WBA (+0.24%), ED (-0.50%), XOM (-0.55%), WU (+7.13%)
    Short Picks (July 29 open – August 4 close % change): HES (+1.34%), XLNX (+2.30%), SPGI (-0.71%), APD (-3.33%), KO (-3.01%)Average long result: +0.81%, average short result: +0.68%
    Total profit (average): +0.75%
  • July 28, 2020
    Long Picks (July 22 open – July 28 close % change): MLM (-5.87%), MCD (+1.57%), INTC (-19.84%), XOM (-1.36%), IRM (+2.58%)
    Short Picks (July 22 open – July 28 close % change): COG (-0.38%), WY (+6.86%), SPGI (-1.77%), APD (-0.40%), HD (+1.02%)Average long result: -4.59%, average short result: -1.07%
    Total profit (average): -2.83%
  • July 21, 2020
    Long Picks (July 15 open – July 21 close % change): DOW (-1.40%), INTC (+2.83%), MCD (-0.47%), XOM (-0.84%), HST (-1.54%)
    Short Picks (July 15 open – July 21 close % change): COG (+4.57%), VNO (-5.52%), AON (+2.30%), LIN (+1.36%), AAPL (-2.01%)Average long result: -0.28%, average short result: -0.14%
    Total profit (average): -0.21%

Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, August 5 – Tuesday, August 11 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (August 5) and sold or bought back on the closing of the next Tuesday’s trading session (August 11).

We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.

First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.

There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.

We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s.

Based on the above, we decided to choose our stock picks for the next week. We will choose our top 3 long and top 3 short candidates using trend-following approach, and top 2 long and top 2 short candidates using contrarian approach:

Trend-following approach:

  • buys: 1 x Technology, 1 x Consumer Staples, 1 x Materials
  • sells: 1 x Energy, 1 x Real Estate, 1 x Financials

Contrarian approach (betting against the recent trend):

  • buys: 1 x Energy, 1 x Real Estate
  • sells: 1 x Technology, 1 x Consumer Staples

Trend-following approach

Top 3 Buy Candidates

V Visa Inc. – Technology

  • Stock remains above two-month-long upward trend line
  • Potential medium-term uptrend continuation
  • The resistance level of $200

WBA Walgreens Boots Alliance, Inc. – Consumer Staples

  • Potential short-term uptrend continuation pattern – bull flag
  • The resistance level of $44 (short-term upside profit target)
  • The support level remains at $38-39

ECL Ecolab, Inc. – Materials

  • Stock remains above the support level of $185
  • Potential medium-term bull flag pattern
  • The resistance level and upside profit target level at $205-215

Summing up, the above trend-following long stock picks are just a part of our whole Stock Pick Update. The Technology, Consumer Staples and Materials sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *


All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.


Health Concerns Hammer Stocks, Dollar Jumps 


Traders in Europe are paying close attention to developments in the US. According to Reuters, 42 of the 50 states in the US registered an increase in the number of new cases yesterday, so that is influencing sentiment on this side of the Atlantic.

Grafton Group shares are in demand today as the company confirmed that trading in June was better than expected. The group, like its peers, remarked on the pent up demand as a result of the lockdown. Revenue last month increased by 11.4% to £247.8 million. It is worth noting the company made an acquisition last July, so the numbers were a bit misleading, but nonetheless, demand was robust.

The pandemic had a negative impact on the business as revenue for the six month period fell by over 19% to £1.06 billion, but traders are focused on the rebound in activity since things have gone back to normal. Grafton is in a strong position in terms of liquidity as it has access to £658 million, so there are no concerns on that front. No guidance was issued on account of the uncertainty. In April, it was announced that directors would be taking a pay cut, and because of the strong trading last month, the cut has been reversed, and that is a sign the company is over the worst of the crisis.

Rolls Royce shares had a volatile start to the trading session on the back of its first half update. The engineering giant has been hit hard by the pandemic as air travel has been severely impacted, so in turn demand for aircraft engines has tumbled. In May, the group announced plans to cut up to 9,000 jobs from its workforce of 52,000. At the back end of last week, the group said it was exploring its options in regards to strengthening its balance sheet, and traders took that as a sign that even more restructuring plans would be mapped out.

This morning, the group said it cut costs in the first half by £300 million, and it will cut costs by another £700 million by the end of the year. Its pro-forma liquidity position stands at £8.1 billion. The stock initially traded higher as dealers were encouraged by the cost cutting plans, but the positive move didn’t last long. Traders latched onto the fact that cash outflow was £3 billion in the first half and that an additional £1 billion would flow out in the rest of the year. Looking further down the track, the company expects cash consumption to significantly reduce. Rolls Royce is targeting free cash flow of at least £750 million in 2022.

Vistry, the housebuilder, saw a doff-off in completions in the first half as the lockdown disrupted activity, but demand is respectable and the order book is healthy. In terms of forward sales, including partnerships, the group has £1.26 billion worth of work in the pipeline, and that has taken the light off the underperformance in the first half.

Revenue from house building in the six month period was £344 million, and that was a big fall from the £854 million registered last year. The fall in revenue from the partnership’s unit was less severe. Efficiencies from integration are improving at a faster rate than expected. The net debt position was cut to £355 million from £476 million in May. The sizeable fall in debt should take some pressure off the company in terms of interest rate payments.

Persimmon issued an update covering the first six months of the year. It was similar to that from Vistry, whereby there was a fall in the number of houses it completed, but the order book is robust. Revenue in the six month period was £1.19 billion, which was a 32% fall on the year. Average selling prices ticked by 3.7% to £225,050. The order book is up 15% on the year at £1.86 billion. The economic climate is uncertain, but the housebuilder confirmed that cancellations are at historic lows.

The housebuilding sector as a whole is higher today on the back of yesterday’s announcement from Rishi Sunak, the Chancellor of the Exchequer, the stamp duty threshold will be lifted from £125,000 to £500,000.

SAP shares hit a record high as its preliminary second quarter results were well-received. Revenue increased by 2% to €7.64 billion. Operating profit rose by 7% to €1.96 billion. The group confirmed that full-year earnings will be €8.1-€8.7 billion.

Boohoo shares are back in fashion after a torrid few days. The group is still carrying out an investigation into its UK supply chain. There has been an allegation that the group was connected to a supplier who paid its staff below the minimum wage, something Boohoo has denied.


The S&P 500 is showing a loss of over 1% as the health crisis is hanging over sentiment on Wall Street. Lately, the tech sector has been booming, but even the NASDAQ 100 is 0.35% lower this afternoon.

The initial jobless claims reading fell from 1.41 million to 1.31 million. It has dropped for 14 weeks in a row. The continuing claims update came in at 18.06 million, and that was a fall from the previous reading of 18.76 million. It is clear that the labour market in the US is improving, but the pace of progress is slow. Several US states have either paused or reversed the reopening of their economies so that is likely to hold back the jobs market.

Walgreens Boots Alliance shares are in the red as the third quarter EPS was 83 cents, while equity analysts were expecting $1.19. Revenue was slightly higher on the year as it was $34.63 billion, fractionally topping forecasts. Same store sales in the US increased by 3%, and traders were anticipating a decline of 0.2%. The UK business suffered amid the lockdown even though stores remained open as it was deemed an essential service. The group is cutting costs on account of the economic environment. Boots will cut 4,000 jobs.

Carnival Corp shares are up today as it was announced that its Germany subsidiary, AIDA, will recommence three cruises from August. The business has to restart from somewhere, and even if that is a low point, but at least it projects a positive message.

The recent rally in Chinese stocks has spilled over to the US, as stocks like NetEaseJD.Com and Alibaba have listings in New York too. Recently, the China Securities Journal published a bullish article about domestic equities, and the positive sentiment is still doing the rounds.

Bed Bad & Beyond shares have tumbled on the back of the latest quarterly update. Revenue fell by 49% to $1.31 billion, undershooting the $1.39 billion forecast. The loss per share narrowed to $1.96, but equity analysts were predicting a loss per share of $1.22. The company plans to close roughly a fifth of its namesake stores over the next two years.

It was reported that Wells Fargo is planning on cutting jobs, the group will post its latest quarterly numbers next week.


The US dollar index fell to its lowest level in nearly one month in this session, but it has since rebounded as traders are in risk-off mode. EUR/USD is down today on account of the move in the greenback. The latest trade data from Germany showed that imports and exports in May increased by 3.5% and 9% respectively. Both readings showed huge rebounds on the month, but the levels missed economists’ forecasts of 12% and 13.8% respectively.

GBP/USD was higher earlier, but the turnaround in the greenback hit the currency pair. Political uncertainty exists in regards to the UK’s post-transition period relationship with the EU, but the pound has been gaining ground this week. According to a report from the FX options market, there has been an increase in the number of bullish trades on GBP/USD.


Gold is just about above the $1,800 mark. Yesterday the metal hit its highest level since September 2011 and it remains in its uptrend. The commodity has been popular lately as it attracted safe-haven flows but that isn’t the case today on account of the upward move in the dollar. European and most US equity markets haven’t retested their June highs as health fears continue to circulate, and that has helped gold in the past month.

Oil prices are in the red today as fears that US demand will dwindle on account of the pandemic has impacted the energy market. The EIA report yesterday showed that gasoline inventories in the US fell by over 4.8 million barrels, a sign that people were driving more. The finer details showed that areas where lockdown restrictions were reintroduced, saw a fall in consumption, so traders are mindful of that today.

For a look at all of today’s economic events, check out our economic calendar.

By David Madden (Market Analyst at CMC Markets UK)

Walgreens Boots Flips to Loss in Q3; Target $50 in Bull Case and $30 in Bear

Walgreens Boots Alliance Inc, a global retail pharmacy provider, reported a loss in the third quarter compared with a profit a year earlier, hammered by non-cash impairment charges of $2 billion in Boots UK as the ongoing COVID-19 pandemic severely impacted businesses worldwide.

The company reported an operating loss of $1.6 billion, compared to operating income of $1.2 billion a year ago; Adjusted operating income decreased 46.5% to $919 million on a reported basis, down 46.4% on a constant currency basis, the company said.

Walgreens’ loss per share was $1.95, compared to earnings per share of $1.13 a year ago; Adjusted EPS decreased 43.8% from $1.47 to $0.83, down 43.4% on a constant currency basis; Results reflected $0.61 to $0.65 per share estimated operational impact from COVID-19.

Both operating income and adjusted operating income included an adverse impact of $700 million to $750 million from the above items, or $0.61 to $0.65 per share, excluding impairment charges. Walgreens Boots Alliance Inc also announced plans to reduce 4,000 workforce at pharmacy chain Boots UK.

Executive comment

“Prior to the pandemic our financial performance for fiscal 2020 was on track with our expectations. However, this unprecedented global crisis led to a loss in the quarter as stay-at-home orders affected all of our markets. I’m very proud of how all of our teams mobilized and adapted to deliver essential services in our communities across the world,” Executive Vice Chairman and CEO Stefano Pessina said in a press release.

“Shopping patterns are evolving more rapidly than ever as consumers further embrace digital options, spurring us to accelerate our ongoing investments in digital transformation and neighbourhood health destinations. This includes our two recent announcements: a significant expansion of our primary care clinics collaboration with VillageMD, and our strategic partnership with Microsoft and Adobe to launch a personalized omnichannel healthcare and shopping experience.”

Walgreens Boots’ stock price forecast

Four analysts forecast the average price in 12 months at $47.75 with a high forecast of $50.00 and a low forecast of $45.00. The average price target represents a 12.91% increase from the last price of $42.29. All four analysts rated ‘Hold’, none rated ‘Buy’ or ‘Sell’, according to Tipranks.

Morgan Stanley target price is $45 with a high of $58 under a bull scenario and $30 under the worst-case scenario. BofA Global Research cuts price objective to $43 from $44 and Mizuho cuts target price to $48 from $53 and Cowen and Company cuts price target to $48 from $54.

It is good to hold now as 50-day Moving Average and 100-200-day MACD Oscillator signals a selling opportunity.

Analyst view

“Walgreens Boots Alliance operates a top 2 retail pharmacy chain in the U.S. as well as Boots Pharmacy and Alliance drug distribution in Europe. FY20 guidance calls for a turnaround in core US business but delivering on EBIT outlook relies on improving fundamentals which are out of the company’s control, including better script trends, brand inflation, and front end,” Ricky Goldwasser, equity analyst at Morgan Stanley noted in June.

“Walgreens has the balance sheet to deploy capital into M&A, as well as the strategic optionality to potentially reposition its portfolio of assets in a changing healthcare marketplace. Unveiling a new strategy that provides a roadmap to future growth is a potential catalyst for shares,” she added.

Walgreens Drags Dow Lower Just Days After Replacing GE

The Dow is down sharply early Thursday with the headlines blaming lingering concerns over an escalating trade war between the United States and its major trading partners, China and the European Union for the triple-digit, 0.48% loss.

However, if you dig deeper into the cause of the sell-off and the size of the move, you may want to place the blame on the performance of Walgreens.

Just days after Walgreens (WBA) replaced General Electric Company (GE) in the Dow Jones Industrial Average after the close on Monday, it is the biggest drag on the stock market.

The catalyst behind the weakness in Walgreens, or for that matter the health-care sector today is the news that Amazon is acquiring online pharmacy PillPack in a deal that could shake up the prescription drug industry.

Although both Amazon and PillPack did not disclose the details of the pact, traders expect the move to be completed during the second half of the year.

According to Walgreens Boots Alliance CEO Stefano Pessina, “Yes, it’s a declaration of intent from Amazon.”

This is significant to the health-care industry because it may lead to lower prices for pharmaceutical prescriptions over the long-run. On the surface, the deal is a major sign that Amazon is serious about its intent to move further into the health-care industry.

Analysts are saying that the move threatens to remove one of the few distinguishing factors pharmacy chains have relied on to fend off Amazon, the sale of prescription drugs.

Shares of Walgreens, CVS Health and Rite Aid all tanked after the announcement along with drug distributors Cardinal Health, AmerisourceBergen and McKesson.

Not only is the prescription of the three major retails being threatened, but also their so-called “front of store” sales, which have already suffered from weaker sales due to the impact of Amazon’s main business.

The move by Amazon is important because it represents an aggressive attack on the status quo of the healthcare system in the U.S., which could eventually lead to lower prices for consumers across the board.

Earlier in the year, Amazon announced an alliance with Berkshire Hathaway and JPMorgan Chase to form their own healthcare insurance provider to help their companies get better control over employee and company healthcare costs. Today’s acquisition of PillPack may be part of the retail giant’s overall play to lower healthcare costs.

The weakness in the healthcare sector today is just another concern for investors who are already facing challenges this week from escalating trade war tensions.