Walgreens Boots Alliance Inc (NASDAQ:WBA) reported better-than-expected adjusted earnings per share of $1.02 this morning, or 22.9% higher than its EPS in the same quarter last year, for its fiscal third quarter which ended on May 31. Wall Street was expecting a bottom line of $0.87 per share. The results have sent the company’s shares climbing in pre-market trading, by 3.60%. According to the drugstore chain operator, adjusted net earnings attributable to Walgreens Boots Alliance increased 39.9% to $1.1 billion compared to the year-ago quarter. Sales increased to $28.8 billion, it added, or 48.4% better than the third quarter of fiscal year 2014, which included pharmacy sales growing by 7%. However, analysts were expecting $29.7 billion in revenue, and the firm’s gross profit margin rate fell to 26%, a decrease of 206 basis points. The firm, nonetheless, raised and narrowed its outlook for the full 2015 fiscal year to a range of $3.70 to $3.80 per share for adjusted net earnings attributable to Walgreens Boots Alliance on a diluted basis. The firm previously forecast a range of $3.45 to $3.65 per share. It also reiterated its goal of adjusted net earnings per diluted share of $4.25 to $4.60 for fiscal year 2016. Walgreens Boots Alliance Inc (NASDAQ:WBA)’s Board of Directors has also named Stefano Pessina, vice chairman and the current acting CEO of the company, as the firm’s permanent CEO.
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The better-than-expected profit for the company is in contrast to a slightly less enthusiastic hedge fund crowd among those tracked by Insider Monkey. At the end of the first quarter, a total of 69 of the hedge funds tracked by Insider Monkey held long positions in this stock, a slight slide of 1% from the previous quarter. Meanwhile, though the value of their total holdings increased by 6.87% to $7.48 billion by the end of the first quarter, the stock jumped 11.13% from January 2 to March 31, meaning there was a slight decrease in holdings owned by the smart money that we track. This isn’t necessarily unexpected though, given that the firm completed its merger with Alliance Boots at the end of the year, which likely led to several merger arb players leaving the stock in the first quarter.
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 135% and beating the market by more than 80 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.
Insider Monkey also tracks insider transactions in the form of purchases or sales of shares in companies like Walgreens Boot Alliance. This is to see whether company executives are also betting on their firm’s stock. Director John Anthony Lederer bought 20,000 shares of the firm on April 29, while Chief Information Officer Thomas Sabatino Jr. sold 36,477 shares on January 29.
Keeping this in mind, we’re going to go over the new action regarding Walgreens Boots Alliance Inc.
How have hedgies been trading Walgreens Boots Alliance Inc (NASDAQ:WBA)?
According to hedge fund intelligence website Insider Monkey, Andreas Halvorsen‘s Viking Global had the biggest position in Walgreens Boots Alliance Inc (NASDAQ:WBA): 14.6 million shares worth close to $1.24 billion, comprising 4.8% of its total 13F portfolio. Sitting in the second spot was JANA Partners, managed by Barry Rosenstein, which held a $1.16 billion position of 13.75 million shares; the fund had 6.8% of its 13F portfolio invested in the stock. Some other hedge funds that held long positions include Daniel S. Och’s OZ Management, John Griffin’s Blue Ridge Capital, and Michael Lowenstein’s Kensico Capital.
Since Walgreens Boots Alliance Inc (NASDAQ:WBA) has witnessed bearish sentiment from hedge fund managers, there was a specific group of hedge funds who were dropping their full holdings last quarter. Intriguingly, Lee Ainslie‘s Maverick Capital dumped the largest investment of all the hedgies watched by Insider Monkey, worth an estimated $96.1 million, of call options underlying 1.26 million shares. Eric W. Mandelblatt’s fund, Soroban Capital Partners, also closed its position of call options underlying 731,500 shares, a position worth about $55.7 million.
While hedge fund sentiment was slightly bearish, we believe Walgreens Boots Alliance Inc (NASDAQ:WBA) is trending in the right direction and deserves a buy.
Disclosure: None
