RAD

Walgreens Targets Cost Cuts and In-Store Doctors’ Offices

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Image Source: Walgreens Boots Alliance Inc – Third Quarter Fiscal 2020 IR Earnings Presentation By Callum Turcan On July 9, Walgreens Boots Alliance Inc (WBA) reported its third-quarter fiscal 2020 earnings (period ended May 31, 2020) and raised its dividend by ~2% on a sequential basis. Walgreens has increased its annual dividend over the past 45 consecutive years, earning it Dividend Aristocrat status, though we caution its net debt load weighs negatively on its forward-looking dividend coverage. Shares of WBA yield ~4.6% as of this writing. Walgreens suspended its share buyback program to preserve cash in the face of the ongoing coronavirus (‘COVID-19’) pandemic and additionally, management initiated full year guidance for Walgreens’ fiscal 2020 during its latest earnings report. … Read more

Recent Events Concerning Johnson & Johnson

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Image Source: Johnson & Johnson – First Quarter of 2020 IR Earnings Presentation By Callum Turcan We include Johnson & Johnson (JNJ) as a top-weighted holding in the Dividend Growth Newsletter portfolio and as a medium-weighted holding in the Best Ideas Newsletter portfolio. The firm’s Dividend Cushion ratio sits at a solid 2.1, and please note that this forward-looking dividend coverage ratio factors in our expectations that Johnson & Johnson will grow its per share dividend by mid-single-digits annually over the coming years. Johnson & Johnson earns a “GOOD” Dividend Safety rating and an “EXCELLENT” Dividend Growth rating, with shares of JNJ yielding ~2.8% as of this writing. In our view, Johnson & Johnson’s strong balance sheet and high quality … Read more

Johnson & Johnson Beats Estimates, Adjusts Guidance in Light of COVID-19

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Image Source: Johnson & Johnson – First Quarter 2020 Earnings IR Presentation By Callum Turcan On April 14, Best Ideas Newsletter and Dividend Growth Newsletter portfolio holding Johnson & Johnson (JNJ) increased its quarterly dividend by over 6% sequentially to $1.01 per share which represents the firm’s 58th consecutive annual increase. We view this payout boost in the face of the ongoing coronavirus (‘COVID-19’) pandemic as a sign of management’s confidence in Johnson & Johnson’s future free cash flows, which we appreciate. Shares of JNJ now yield ~2.8% as of this writing at the new annualized payout rate. Additionally, Johnson & Johnson also posted its first-quarter 2020 earnings report on April 14 which beat both consensus top- and bottom-line expectations … Read more

Health Care Sector Remains Hot

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Image Shown: The Health Care Select Sector SPDR ETF, a holding in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios, has been on an upward tear over the past several years. Strong macro tailwinds combined with the ability for industries within the health care sector to generate meaningful shareholder value have been key to supporting strong capital appreciation of equities operating in the area of late. By Callum Turcan The Health Care Select Sector SPDR ETF (XLV) is a top holding in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios. We like the exposure and diversification to health care equities that XLV provides. XLV yields ~1.5% as of this writing. State Street Corp (STT) acts as … Read more

Johnson & Johnson Announces New Test Results That Reveal No Traces of Asbestos in Johnson Baby Powder Products

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Image Source: Johnson & Johnson – February 2019 CAGNY IR Presentation By Callum Turcan A holding in both our Dividend Growth Newsletter and Best Ideas Newsletter portfolios, shares of Johnson & Johnson (JNJ) have been on a wild ride of late over dueling narratives regarding the firm’s potential legal liabilities. In particular, liabilities concerning its talc-based Johnson Baby Powder product. On October 18, Johnson & Johnson announced it was voluntarily recalling “a single lot” of its Johnson Baby Powder product (equal to around 33,000 bottles) after the US FDA found sub-traces of chrysotile asbestos in a single bottle (less than 0.00002%). At the time, Johnson & Johnson vigorously defended its baby care brand and said that its Johnson Baby Powder … Read more

Amazon: The Destroyer of Other Companies’ Profits

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Image Source: Victor Amazon is stepping into the pharmacy business with the purchase of online pharmacy start-up PillPack. The market is implying the move will prove to be more than just a headache for those operating in the drug store/pharmacy and drug-distributor complex. Whether the impact will be significantly material in the coming years remains to be seen, but it’s a big directional negative for impacted parties. By Brian Nelson, CFA We saw the writing on the wall. We had once included CVS Health (CVS) in the simulated Dividend Growth Newsletter portfolio and the simulated Best Ideas Newsletter portfolio, but we ditched the company in February. We couldn’t envision a scenario at the time where things would be getting better … Read more

Market Valuations Not “Insane” But Certainly Not Cheap Either

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The stock market is not insanely overpriced, but it is certainly not cheap either. We’re watching the technicals and moves in the 10-year Treasury closely for signs of where the market may go next. We discuss Walmart’s recent disappointment and add another to the list of companies that the Dividend Cushion ratio effectively highlighted the heightened income risk profile of, prior to the dividend cut. Chipotle is on the move! By Kris Rosemann and Brian Nelson, CFA According to the February 16, 2018 release of Factset’s Earnings Insight, the forward 12-month P/E ratio for the S&P 500 is still north of 17 times, above both the 5-year average of 16 and the 10-year average of 14.3. The “right” multiple for … Read more

CVS Health Under Review – Hit by a Storm of Negativity

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Image Source: Mike Mozart We are putting the fair value estimate of CVS Health under review while we re-evaluate the competitive environment and reassess the company’s appetite for leverage, which could impact dividend health. Brian Nelson, CFA Boy has CVS Health (CVS) been hit by a storm of negativity in recent months. After we added it to the newsletter portfolios, the company has gotten caught up in a whirlwind of investor concern regarding Amazon’s (AMZN) probable entrance in the pharmacy market. We noted as much in our September 30 note, “Amazon Casts a Large Shadow Over the Pharmacy Market,” and we said that even we were “growing more and more cautious on shares,” as we pointed to Amazon’s potential acquisition … Read more

Amazon Casts a Large Shadow Over the Pharmacy Industry

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Image Source: Mike Mozart It is our belief the food retailing industry is in the midst of widespread disruption with Amazon’s attempt to break into the supermarket game with its audacious purchase of Whole Foods. The Whole Foods acquisition is not likely to be an isolated one-off event; instead, it may be a harbinger of Amazon’s ambition to break into new markets, thus expanding its overall percentage of retail sales. We update our views on Amazon and how the company may eventually impact newsletter portfolio holding CVS Health. By Alexander J. Poulos Emulating the Costco Model Amazon’s (AMZN) purchase of Whole Foods (WFM) may be the initial step towards emulating the uber-successful Costco (COST) model where the bulk of profits … Read more

CVS Health Still Stuck in Neutral

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CVS Health continues to perform as expected in the current lower reimbursement environment. We remain enthused with the copious amount of free cash flow that the enterprise produces, which has allowed management to continue its shareholder-friendly ways. We remain vigilant for signs of a key inflection point, however, and a catalyst may exist in the results of the current PBM selling season. By Alexander J. Poulos Overview CVS Health (CVS) operates a hybrid pharmacy model–it has melded together a ubiquitous pharmacy chain with a world-class Pharmaceutical Benefit Management (PBM) business. The hybrid model directly contrasts with the model operated by its primary rival Walgreens (WBA), which maintains a focus on pharmacy retail operations. The pharmacy retail field continues to consolidate … Read more