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Here's Why You Should Retain Walgreens Boots (WBA) For Now
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Walgreens Boots Alliance, Inc. (WBA - Free Report) is gaining from continued partnership growth and a strong focus on strategic execution. The company ended the first quarter of fiscal 2023 with better-than-expected earnings. The company’s long-term growth model looks encouraging. However, weak margins and stiff rivalry do not bode well.
In the past year, the Zacks Rank #3 (Hold) stock has declined 22.9% compared with a 16.3% fall of the industry and a 8.7% plunge of the S&P 500.
The renowned pharmacy-led health and beauty retail company has a market capitalization of $31.52 billion. The company’s earnings surpassed estimates in all trailing four quarters, delivering a surprise of 4.72% on average. However, the company’s long-term projected growth rate of 5% remains behind the industry’s growth projection of 6.2%.
Let’s delve deeper.
Factors At Play
Q1 Upsides: Walgreens Boots exited first-quarter fiscal 2023 with better-than-expected earnings and revenues. The company’s U.S. Healthcare business grew, led by key contract wins, continued partnership growth and a strong focus on execution. The company achieved the calendar year 2022 target for co-located VillageMD clinics of 200.
The company continues to play a leading role in COVID-19 vaccinations and testing, administering 8.4 million vaccinations in the reported quarter. Walgreens Boots raised its U.S. Healthcare target in November, including the fiscal year 2025 sales goal to the range of $14.5-$16.0 billion, up from $11.0-$12.0 billion previously. The company raised 2023 sales guidance, reflecting continued growth momentum.
New Alliances Look Strategic: The intensifying competition in the U.S. pharmacy retail drugstore market has compelled Walgreens Boots to diversify its product offerings through new partnerships.
Image Source: Zacks Investment Research
In November 2022, VillageMD entered into a definitive agreement to acquire Summit Health-CityMD -- a leading provider of primary, specialty and urgent care. The transaction is valued at approximately $8.9 billion, with investments from Walgreens Boots Alliance and an affiliate of Evernorth, a subsidiary of Cigna Corporation. With Investments from WBA and Evernorth, the Combined Company Will Deliver a Unique and Comprehensive Patient Experience for Optimal Individual and Community Outcomes.
Long-Term Growth Model Looks Encouraging: During the first-quarter-fiscal 2023 earnings call, Walgreens Boots noted that U.S. Healthcare targets raised with Summit Health announcement on November 7, 2022, including the fiscal year 2025 sales goal to $14.5 billion to $16.0 billion, up from $11.0 billion to $12.0 billion previously, and positive adjusted EBITDA expected for the segment by the end of the fiscal year 2023.
Looking beyond 2023, increased clarity into the company's long-term growth algorithm, building to low-teens adjusted EPS growth in fiscal 2025 and beyond.
Downsides
Pressure on Margin Continues: In the last few years, the slowdown in the generic introduction has been affecting Walgreens Boots’ margins. Of late, increased reimbursement pressure and generic drug cost inflation have been hampering Walgreens’ margin on a significant level.
Competitive Landscape: Walgreens Boots faces headwinds from increased competition and tough industry conditions. Even though the company continues to grab market share from other traditional drugstore retailers, major mass merchants such as Target and Wal-Mart are expanding their pharmacy businesses and enjoying a fair market share.
Estimate Trend
In the past 90 days, the Zacks Consensus Estimate for its fiscal 2023 earnings has moved 0.2% down to $4.50.
The Zacks Consensus Estimate for fiscal 2023 revenues is pegged at $134.51 billion, suggesting a 1.4% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Cardinal Health, Inc. (CAH - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) .
AMN Healthcare, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 3.3%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 10.9%.
AMN Healthcare has gained 5.4% against the industry’s 19.6% decline in the past year.
Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average beat being 6.4%.
Cardinal Health has gained 48.7% against the industry’s 0.8% decline in the past year.
Merit Medical, flaunting a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 25.4%.
Merit Medical has gained 28.1% against the industry’s 0.8% decline in the past year.
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Here's Why You Should Retain Walgreens Boots (WBA) For Now
Walgreens Boots Alliance, Inc. (WBA - Free Report) is gaining from continued partnership growth and a strong focus on strategic execution. The company ended the first quarter of fiscal 2023 with better-than-expected earnings. The company’s long-term growth model looks encouraging. However, weak margins and stiff rivalry do not bode well.
In the past year, the Zacks Rank #3 (Hold) stock has declined 22.9% compared with a 16.3% fall of the industry and a 8.7% plunge of the S&P 500.
The renowned pharmacy-led health and beauty retail company has a market capitalization of $31.52 billion. The company’s earnings surpassed estimates in all trailing four quarters, delivering a surprise of 4.72% on average. However, the company’s long-term projected growth rate of 5% remains behind the industry’s growth projection of 6.2%.
Let’s delve deeper.
Factors At Play
Q1 Upsides: Walgreens Boots exited first-quarter fiscal 2023 with better-than-expected earnings and revenues. The company’s U.S. Healthcare business grew, led by key contract wins, continued partnership growth and a strong focus on execution. The company achieved the calendar year 2022 target for co-located VillageMD clinics of 200.
The company continues to play a leading role in COVID-19 vaccinations and testing, administering 8.4 million vaccinations in the reported quarter. Walgreens Boots raised its U.S. Healthcare target in November, including the fiscal year 2025 sales goal to the range of $14.5-$16.0 billion, up from $11.0-$12.0 billion previously. The company raised 2023 sales guidance, reflecting continued growth momentum.
New Alliances Look Strategic: The intensifying competition in the U.S. pharmacy retail drugstore market has compelled Walgreens Boots to diversify its product offerings through new partnerships.
In November 2022, VillageMD entered into a definitive agreement to acquire Summit Health-CityMD -- a leading provider of primary, specialty and urgent care. The transaction is valued at approximately $8.9 billion, with investments from Walgreens Boots Alliance and an affiliate of Evernorth, a subsidiary of Cigna Corporation. With Investments from WBA and Evernorth, the Combined Company Will Deliver a Unique and Comprehensive Patient Experience for Optimal Individual and Community Outcomes.
Long-Term Growth Model Looks Encouraging: During the first-quarter-fiscal 2023 earnings call, Walgreens Boots noted that U.S. Healthcare targets raised with Summit Health announcement on November 7, 2022, including the fiscal year 2025 sales goal to $14.5 billion to $16.0 billion, up from $11.0 billion to $12.0 billion previously, and positive adjusted EBITDA expected for the segment by the end of the fiscal year 2023.
Looking beyond 2023, increased clarity into the company's long-term growth algorithm, building to low-teens adjusted EPS growth in fiscal 2025 and beyond.
Downsides
Pressure on Margin Continues: In the last few years, the slowdown in the generic introduction has been affecting Walgreens Boots’ margins. Of late, increased reimbursement pressure and generic drug cost inflation have been hampering Walgreens’ margin on a significant level.
Competitive Landscape: Walgreens Boots faces headwinds from increased competition and tough industry conditions. Even though the company continues to grab market share from other traditional drugstore retailers, major mass merchants such as Target and Wal-Mart are expanding their pharmacy businesses and enjoying a fair market share.
Estimate Trend
In the past 90 days, the Zacks Consensus Estimate for its fiscal 2023 earnings has moved 0.2% down to $4.50.
The Zacks Consensus Estimate for fiscal 2023 revenues is pegged at $134.51 billion, suggesting a 1.4% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Cardinal Health, Inc. (CAH - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) .
AMN Healthcare, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 3.3%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 10.9%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMN Healthcare has gained 5.4% against the industry’s 19.6% decline in the past year.
Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average beat being 6.4%.
Cardinal Health has gained 48.7% against the industry’s 0.8% decline in the past year.
Merit Medical, flaunting a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 25.4%.
Merit Medical has gained 28.1% against the industry’s 0.8% decline in the past year.