First, building a healthy, large and growing business, launched from scratch and assembled by acquisitions of young companies, is difficult at best. Our concern is that Walgreens’ efforts to build its “next growth engine with consumer-centric healthcare solutions” may have two fatal flaws. This readily leads to THE major question: is its transition strategy any good? But, if the long-term growth story can be derailed by a predictable short-term issue, then it isn’t much of a long-term growth story. Post-pandemic vaccine trends and other near-term consumer behavior may well have weakened this particular quarter’s results. The uninspiring results – not the first during its transition strategy – continue to demonstrate that Walgreens isn’t meeting its growth targets. With only one quarter remaining, the updated guidance cut fourth-quarter earnings by over 40%. The company reported a disappointing quarter and reduced its full-year earnings guidance by 12%. Walgreens is concentrating on the United States market where it is developing its stores into a healthcare network, led by the much-needed fresh perspective from the new CEO. And, pricing pressure from private and government payors is squeezing its prescription profit margin. Walgreens Boots Alliance (WBA) – Once a retail pharmacy powerhouse, Walgreens faces hefty secular challenges from an overbuilt and mature store base, with customers who have plenty of alternatives to visiting its often poorly run and expensively priced stores. After years of difficulties, a diligent and impressive turnaround effort is underway and starting to show progress, even as investors overly discount its prospects. Foster Company (FSTR), a small-cap manufacturing and distribution company focused on the railroad, precast concrete structures and customized steel fabrication industries as well as coatings and measurements. Our feature recommendation this month is L. This month, we are focusing our research exclusively on small-cap turnarounds and discuss eight names with interesting potential. Companies in this group, with market values generally below $1 billion, can offer worthwhile investment opportunities. In this month’s Cabot Turnaround Letter: While much of our emphasis is on mid-cap and large-cap turnarounds, there are often attractive turnarounds in the small-cap segment of the market. You will find it nowhere else on Wall Street. We source many of our feature recommendations from this list. These catalysts include new CEOs, activist activity, spin-offs and other possible game-changers. This report is a listing of all of the companies that have reported a catalyst in the past month. We encourage you to look through the Catalyst Report. We also include the Catalyst Report and a summary of the July edition of the Cabot Turnaround Letter, which was published on Wednesday. This week, we comment on earnings from Walgreens Boots Alliance (WBA).
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