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Why Is Walgreens (WBA) Up 1.9% Since Last Earnings Report?
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It has been about a month since the last earnings report for Walgreens Boots Alliance (WBA - Free Report) . Shares have added about 1.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Walgreens due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Walgreens Boots Q2 Earnings Top Estimates, Margins Down
Walgreens Boots reported adjusted earnings per share of $1.16 in second-quarter fiscal 2023, down 27.2% year over year (declining 25.8% at a constant-exchange rate or CER). The figure topped the Zacks Consensus Estimate by 5.5%.
GAAP earnings per share in second-quarter fiscal 2023 was $0.81 compared with the year-ago quarter’s earnings of $1.02, falling 20.3%.
Total Sales
Walgreens Boots recorded total sales of $34.86 billion in the fiscal second quarter, up 3.3% year over year and up 4.5% at CER. The top line surpassed the Zacks Consensus Estimate by 4.2%.
Quarterly Details
The company divided its business into three reportable segments — the United States, International and Walgreens Health — at the start of the fiscal year. During the fiscal Q4 announcement, Walgreens Boots stated that it had changed the names of two reportable segments to better align with its business activities, structure, and strategy. The United States segment has changed to U.S. Retail Pharmacy and the Walgreens Health segment has been renamed to U.S. Healthcare.
U.S. Retail Pharmacy
The segment’s sales totaled $27.6 billion for the fiscal second quarter, representing a decline of 0.3% year over year.
Comparable sales increased 3.1% from the year-ago quarter’s levels. Pharmacy sales were up 0.3% from the year-ago quarter’s figures, affected by a 3.5% point headwind from the AllianceRx Walgreens business.
Retail sales fell 1.8% and comparable retail sales were down 1% year over year.
Comparable retail sales (excluding tobacco and e-cigarettes) also fell 0.5% from the prior-year quarter.
International
Revenues in the International division rose 1.6% on a year-over-year basis and increased 9% at CER to $5.7 billion in the fiscal second quarter.
Boots UK sales rose 11% year over year. In Germany, wholesale business sales increased 7.5% in the fiscal second quarter.
Boots UK’s comparable retail sales increased 16%. However, Boots UK’s comparable pharmacy sales rose 2% year over year, primarily due to lower demand for COVID-19 services.
U.S. Healthcare
U.S. Healthcare reported fiscal second-quarter revenues of $1.6 billion. This was up 30% on a pro-forma basis versus the year-ago quarter’s combined result.
Within the segment, the Shields business rose 41%, driven by recent contract wins, further expansion of existing partnerships and strong execution focus. VillageMD increased 30% owing to existing clinic growth and footprint expansion. CareCentrix grew 25% as a result of additional service offerings with existing partners.
Margins
Gross profit for the reported quarter fell 8.5% year over year to $7.01 billion. Gross margin contracted 260 bps to 20.2%.
Selling, general and administrative expenses rose 5.6% year over year to $6.93 billion.
The company reported an adjusted operating profit of $0.1 billion for the quarter under review compared to $1.1 billion of operating profit in the year-ago period.
Adjusted operating margin contracted 304-bps to 0.3%.
Financial Condition
Walgreens Boots exited second-quarter fiscal 2023 with cash and cash equivalents of $1.09 billion compared with $2.35 billion recorded in the first quarter of fiscal 2023. Total debt was $13.04 billion at the end of the fiscal second quarter, up from $11.72 billion at first-quarter fiscal 2023.
Net cash provided by operating activities at the end of second-quarter 2023 was $1.24 million, down from the year-ago period’s $2.18 billion.
The company has a five-year annualized dividend growth rate of 3.31%.
Fiscal 2023 Guidance
The company reinstated its full-year fiscal 2023 guidance
Adjusted EPS guidance is expected in the range of $4.45 to $4.65. The current Zacks Consensus Estimate is pegged at $4.57.
The company expects revenue to be $137.5 billion. The current Zacks Consensus Estimate is pegged at $134.6 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Walgreens has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Walgreens has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Walgreens (WBA) Up 1.9% Since Last Earnings Report?
It has been about a month since the last earnings report for Walgreens Boots Alliance (WBA - Free Report) . Shares have added about 1.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Walgreens due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Walgreens Boots Q2 Earnings Top Estimates, Margins Down
Walgreens Boots reported adjusted earnings per share of $1.16 in second-quarter fiscal 2023, down 27.2% year over year (declining 25.8% at a constant-exchange rate or CER). The figure topped the Zacks Consensus Estimate by 5.5%.
GAAP earnings per share in second-quarter fiscal 2023 was $0.81 compared with the year-ago quarter’s earnings of $1.02, falling 20.3%.
Total Sales
Walgreens Boots recorded total sales of $34.86 billion in the fiscal second quarter, up 3.3% year over year and up 4.5% at CER. The top line surpassed the Zacks Consensus Estimate by 4.2%.
Quarterly Details
The company divided its business into three reportable segments — the United States, International and Walgreens Health — at the start of the fiscal year. During the fiscal Q4 announcement, Walgreens Boots stated that it had changed the names of two reportable segments to better align with its business activities, structure, and strategy. The United States segment has changed to U.S. Retail Pharmacy and the Walgreens Health segment has been renamed to U.S. Healthcare.
U.S. Retail Pharmacy
The segment’s sales totaled $27.6 billion for the fiscal second quarter, representing a decline of 0.3% year over year.
Comparable sales increased 3.1% from the year-ago quarter’s levels.
Pharmacy sales were up 0.3% from the year-ago quarter’s figures, affected by a 3.5% point headwind from the AllianceRx Walgreens business.
Retail sales fell 1.8% and comparable retail sales were down 1% year over year.
Comparable retail sales (excluding tobacco and e-cigarettes) also fell 0.5% from the prior-year quarter.
International
Revenues in the International division rose 1.6% on a year-over-year basis and increased 9% at CER to $5.7 billion in the fiscal second quarter.
Boots UK sales rose 11% year over year. In Germany, wholesale business sales increased 7.5% in the fiscal second quarter.
Boots UK’s comparable retail sales increased 16%. However, Boots UK’s comparable pharmacy sales rose 2% year over year, primarily due to lower demand for COVID-19 services.
U.S. Healthcare
U.S. Healthcare reported fiscal second-quarter revenues of $1.6 billion. This was up 30% on a pro-forma basis versus the year-ago quarter’s combined result.
Within the segment, the Shields business rose 41%, driven by recent contract wins, further expansion of existing partnerships and strong execution focus. VillageMD increased 30% owing to existing clinic growth and footprint expansion. CareCentrix grew 25% as a result of additional service offerings with existing partners.
Margins
Gross profit for the reported quarter fell 8.5% year over year to $7.01 billion. Gross margin contracted 260 bps to 20.2%.
Selling, general and administrative expenses rose 5.6% year over year to $6.93 billion.
The company reported an adjusted operating profit of $0.1 billion for the quarter under review compared to $1.1 billion of operating profit in the year-ago period.
Adjusted operating margin contracted 304-bps to 0.3%.
Financial Condition
Walgreens Boots exited second-quarter fiscal 2023 with cash and cash equivalents of $1.09 billion compared with $2.35 billion recorded in the first quarter of fiscal 2023. Total debt was $13.04 billion at the end of the fiscal second quarter, up from $11.72 billion at first-quarter fiscal 2023.
Net cash provided by operating activities at the end of second-quarter 2023 was $1.24 million, down from the year-ago period’s $2.18 billion.
The company has a five-year annualized dividend growth rate of 3.31%.
Fiscal 2023 Guidance
The company reinstated its full-year fiscal 2023 guidance
Adjusted EPS guidance is expected in the range of $4.45 to $4.65. The current Zacks Consensus Estimate is pegged at $4.57.
The company expects revenue to be $137.5 billion. The current Zacks Consensus Estimate is pegged at $134.6 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Walgreens has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Walgreens has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.