Goldman Sachs Gives Color On Walgreen Co. Following Earnings, Reiterates CL-Buy

Goldman Sachs reiterates its CL-Buy on Walgreen Co. WAG. Importantly, higher product costs should not be a dominant issue for drug stores, given their convenience orientation and low-price visibility, which should enable them to pass through increases at least as effectively as discount competitors. As such, WAG's 2Q should be as tough as it gets on this issue. Goldman Sachs is trimming forecasts. FY11 falls by $0.08, to $2.66. The cuts reflect lower front-end margin assumptions, offset in part by a smaller hit from reimbursement in the May quarter vs. an easier compare. This hit is offset by slightly higher sales forecasts. FY12 goes to $3.07 from $3.10. FY13 goes to $3.42 from $3.48. The 12-month price target goes to $47 from $48 on the cuts. Risks to the target price include reimbursement pressure and product cost inflation. WAG closed Tuesday at $39.21