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Flu gives local pharmacies a shot in the arm

by Zongwei Li
Jan 22, 2013


Zongwei Li/MEDILL

Walgreen Co.'s second-quarter bottom line is likely to increase partially because of the strong demand of flu shots, according to analysts.

It’s not uncommon these days to see a man sneezing in the corner of a café or a woman blowing her nose right on the El. In fact this year’s flu season is one of the nastiest in recent years with 48 states reporting widespread influenza infections, according to the Centers for Disease Control and Prevention.

That is not bad news for everyone, including pharmacy chains, where people have been lined up for vaccinations. Sales and profits at Deerfield-based Walgreen Co. are likely to jump, according to analysts.

Raymond James Financial Inc. upgraded its rating on Walgreen shares, the nation’s largest private flu vaccine provider, to outperform from market perform partially because of the increasing demand for flu shots.

“The strength of the 2012-2013 flu season bodes well for near-term Walgreen revenue trends,” said John Ransom, analyst from Raymond James in a recent research note. “We estimate that 5 million flu shots add 5 cents to 7 cents per share to the bottom line,” he told Medill News Service in an email. In the same quarter last year, Walgreen earned 78 cents per share.

Walgreen said it has given 5.7 million shots as of Jan. 8, up from 5.3 million a year ago.

Kermit Crawford, Walgreen’s president of pharmacy, health and wellness, was equally optimistic after the company’s annual shareholder meeting in Chicago earlier this month.

“We’ve kept our reimbursement rates the same so we are making a consistent level of profitability on flu shots,” Crawford said.

And it’s not only vaccine. Walgreen also is seeing an increase in demand for facial tissues, sports drinks and thermometers among other flu-related items, according to ABC News. Walgreen did not return repeated calls for comment.

Walgreen could use some good news. In the first quarter, it posted a loss related to aftermath of a year-long contract dispute with pharmacy benefits manager Express Scripts Holding Co.. That caused some customers to head to archrival CVS Caremark Corp. to fill prescriptions. The dispute has been resolved and Walgreen is now running radio spots inviting Express Scripts customers back.

Analysts surveyed by Yahoo Finance now expect Walgreen to earn 95 cents per share for the current quarter that will end Feb. 13, 17 cents more than it did a year ago. The company will release its second-quarter earnings report in late March.