[ad_1]
It's the end of an era.
General Electric on Tuesday morning is no longer in the Dow.
There have been tons of funereal stories about GE (GE) to be expelled from the Dow after 111 years. But there was not as much about the "new kid" of the Dow – Walgreens Alliance Boots (WBA).
You have probably already heard of a Walgreens.
This is the giant pharmacy chain that opened in Chicago in 1901 … six years before GE began its expansion of more than a century into the Dow.
But what is happening with the name of Boots Alliance?
Well, it refers to the other big company business. In 2015, Walgreens bought Alliance Boots in Great Britain. Boots is a pharmaceutical retailer and Alliance is a drug distribution and wholesale company.
It's a $ 66 billion company that has achieved a business turnover of $ 33 billion and an operating profit of close to $ 2 billion at last year. quarter.
In relation: What does the mania of fusion mean for health care?
And Walgreens becomes even bigger. He finally completed the purchase of more than 1900 Rite Aid (RAD) stores in March.
This agreement had been in limbo regulation for years and Walgreens abandoned previous plans to buy more Rite Aid stores before agreeing to a new, smaller contract, which eventually passed the company. antitrust review.
In part thanks to the Boots and Rite Aid agreements, analysts expect Walgreens earnings per share to grow by an average of 12% over the next few years.
In other words, the Dow adds a healthy business, if it's not particularly sexy or exciting.
But it's one that does not shrink.
Walgreens shares are up about 50% over the last five years while GE shares have fallen by 45%.
With a price hovering around $ 67, Walgreens is now the 23rd largest company (or the eighth-smallest if you're an empty half-glass company) in the Dow. Walgreens is just below Nike (NKE) and just above DowDuPont (DWDP).
Related: GE shrinks even further
The Dow ranked its companies based on stock prices, not market value like the S & P 500. Even though GE is still valued at $ 111 billion, Walgreens is the smallest company in the Dow Jones. its stock price had plummeted down to teenagers.
With GE, the Dow gate, drug maker Pfizer (PFE), with a price just over $ 36 per share, inherits the Dow member title with the lowest weighting.
Still, the addition of Walgreens is a bit curious.
It would be logical for more dynamic (and probably more important) companies to Amazon (AMZN) and Google owner Alphabet (GOOGL) will not be added to the Dow because they have shares above $ 1,000 and would put the Dow's weighting severely out of control. But it's worth asking why CVS (CVS) – Walgreen's main rival has not been added instead.
CVS, trading at about $ 71 a share, would have about the same weighting as Walgreens.
Related: Surge pharmacies on Amazon report will not sell prescription drugs
And CVS is a more diversified company because of its ownership of the drug benefit management firm Caremark. CVS also generated more revenue than Walgreens last year and is also worth more.
What's more, CVS could soon become even bigger and more diverse thanks to its health insurance purchase plan. Aetna (AET) for 67 billion dollars.
Of course, the Dow already lists Aetna's rivals UnitedHealth (A H) But that should not matter.
The Dow includes banking giants JPMorgan Chase (JPM) and Goldman Sachs (GS) in this one, let alone Pfizer's competitors Merck (MRK) and Johnson & Johnson (JNJ). He understands Microsoft (MSFT) and Apple (AAPL), also.
A spokesperson for S & P Dow Jones Indices did not comment on why Walgreens was chosen for the Dow instead of CVS.
But when the decision to get rid of GE and Walgreens was taken, the S & P Dow Jones Indices said this decision would make the Dow more "representative of the consumer and health sectors of the US economy." And a "better measure of … stock market. "
Add CVS could have accomplished the same thing though.
CNNMoney (New York) First published on June 26, 2018: 8:47 am
[ad_2]
Source link
