Walgreens Replaces GE -- as Year's Worst-Performing Dow Stock

Investing

Published: June 30, 2018 8:40 am

Last Updated: January 11, 2020 9:38 pm

This is probably not the way Walgreens Boots Alliance Inc. (NASDAQ: WBA) wanted its elevation to the blue-chip realm of the 30 stocks that make up the Dow Jones industrials index average to go. The pharmacy retailer not only nabbed General Electric Co.’s (NYSE: GE) spot on the Dow, it ended up its first four days on the index as its worst performer. Walgreens stock is down 17.36% for the year to date.

The second-worst Dow stock so far this year is 3M Co. (NYSE: MMM), which is down 16.4%. That is followed by Procter & Gamble Co. (NYSE: PG), down 15%, Caterpillar Inc. (NYSE: CAT), down 13.9%, and Goldman Sachs Group Inc. (NYSE: GS), down 13.4%. Of the 30 Dow stocks, 18 are showing a loss to date in 2018.

The Dow experienced another tough week, dropping nearly 310 points to close at 24,580.89, down about 1.3% from the previous Friday’s close. It could have been even worse. At Wednesday’s close, the Dow was down more than 450 points for the week. The index closed up less than 1% for the second quarter but down 1.8% for the first six months of 2018.

Walgreens joined the Dow Tuesday and things rocked along pretty much on a flat line until Thursday. Before markets opened that day, Walgreens reported fiscal third-quarter earnings that the company tried to dress-up with a 10% dividend increase and a new $10 billion share buyback program.

The stock traded roughly flat until the hammer fell. Amazon.com Inc. (NASDAQ: AMZN) announced that it had agreed to acquire online pharmacy PillPack. When investors see Amazon attack a sector, they clear out so fast that you’d think their hair was on fire.

And it wasn’t just Walgreens, CVS and Rite Aid that got steamrolled. Pharmacy benefits management firms and drug distribution firms also took a beating. Combined, shares of the companies in these businesses dropped about $20 billion in market cap. Walgreens’ loss amounted to about 11%, or about $7 billion.

Walgreens stock closed at $60.01 on Friday, up about 0.5% for the day in a 52-week range of $59.07 to $83.89. The 12-month consensus price target on the stock is $79.13, and the forward price-to-earnings ratio is 9.26.