Investing

This Stock Is Killing the Dow

Douglas A. McIntyre

Published: July 27, 2019 7:28 am

Last Updated: January 30, 2020 6:02 pm

Only three of the 30 Dow Jones industrial average components are down this year. Pfizer Inc. (NYSE: PFE) is barely off, by 1.28% to $43.09. 3M Co. (NYSE: MMM) is worse, down 8.69% to $173.98. However, Walgreens Boots Alliance Inc. (NYSE: WBA) is off 19.44% to $55.05.

As a yardstick, the Dow is up 16.57% to 27,192.45. That puts it in an all-time high territory. A lot of experts believe it has room to run. If the Federal Reserve cuts rates, in particular, it could surge.

Some comments from Walgreens observers.

In Forbes:

Walgreens Boots Alliance is closing 200 Boots drugstores in the United Kingdom as part of a global “transformation cost management program” launched earlier this year that has figured in store closures in the U.S.

The plan disclosed late last week and confirmed by Walgreens Boots Alliance to shutter 200 U.K. stores and consolidate them with other Boots locations comes after a decision announced earlier this year to shutter more Rite Aid drugstores in the U.S. than originally anticipated. Walgreens initially purchased 1,932 Rite Aid stores and planned to close up to 600, but that number is growing to 750, executives said in April.

Vox editors wrote:

Walmart, Walgreens, CVS, and Rite Aid are among the superstores and chain drugstores named in what will be a major trial regarding corporate complicity in the opioid epidemic.

As reported by the New York Times, the lawsuit filed in federal court last Friday seeks billions of dollars in restitution from corporations that inundated the market with prescription opioids, and consists of almost 2,000 individual cases brought by cities, counties, and Native American tribes around the country where opioid addiction levied heavy death tolls. The lawsuit is expected to go to trial — the biggest civil trial in US history, per the Washington Post — in October.

And Market Realist on July 11:

Walgreens Boots Alliance stock has fallen 18.7% on a YTD (year-to-date) basis as of Wednesday. The stock’s underperformance reflects higher reimbursement pressure on margins and weakness in retail sales in the UK. The company’s management lowered its EPS growth outlook in the second quarter, which reduced its shares.

Higher reimbursement pressure is also taking a toll on CVS Health’s (CVS) stock price. So far, CVS Health stock has fallen 15.5% this year. Besides higher reimbursement pressure, increased interest expenses and the higher outstanding share count are impacting the bottom line and stock.