Goldman Sachs Previews WAG's May Quarter

Goldman Sachs maintains its Buy rating and its $48 price target on Walgreen Company WAG as the company prepares to release its quarter results, due next Tuesday. In the report, Goldman Sachs writes, “For WAG's May quarter results, due out on June 21, we expect EPS of $0.63, vs. $0.52 a year, which stands $0.01 ahead of consensus. While we believe the company's operating initiatives remain very much intact, recent input price increases, and choppier results from general merchandisers, suggest potential for gross margin volatility. We see little trading upside into the quarter as good news on sales has been disclosed and factored into forecasts, whereas the margin volatility that hit peers such as COST and DG may still occur. Also, the stock has outperformed sharply given the segment's defensive characteristics, and as such leaves little margin of safety in the short run. Note that we recently trimmed our August quarter forecast from Street-high, as our prior margin forecast ooked aggressive versus typical seasonal trends, and we raised SG&A to factor in the cost of back-end loaded CCR models.” WAG closed yesterday at $43.79.