Analyst Note| Dylan Finley, CFA |
In a news release issued today, no-moat Walgreens announced that it had reached a $683 million settlement agreement with Florida to resolve outstanding claims against the company's role in distributing and dispensing prescription opioid medications in the state. The net settlement amount is composed of $620 million to be paid over an 18-year period, in addition to $63 million upfront in attorney fees. We expect to publish an updated discounted cash flow model shortly, taking the impact of these cash outflows into account. Because of the long horizon over which the settlement is to be paid, the annualized settlement amount ($34 million/year) should not have a material impact on free cash flow to the firm or impact the company's ability to fund its healthcare services growth initiatives. Therefore, we do not expect a revision to our $48 per share fair value estimate.