What To Expect From Walgreens' Earnings?

| About: Walgreens Boots (WBA)

Summary

Walgreens had a mixed fiscal 2016 (year ends August), with revenues growing 13.4% to $117 billion and earnings per share declining 5% to $3.85.

The surge in revenues was primarily driven by a strong performance from the Retail Pharmacy business, both in the U.S. and internationally. Interestingly, it successfully beat market expectations with respect to earnings, but fell short of revenue estimates in all quarters of the last fiscal year.

In the upcoming results for the quarter ended November 30th, the consensus expectation is for Walgreens to report revenues of $29.2 billion and EPS of $1.09, implying growth of 0.7 and almost 6%, respectively, over Q1 FY'16.

Walgreens Boots Alliance (NASDAQ:WBA) is set to announce its fiscal Q1 earnings on Thursday, January 5th, before the markets open. The company had a mixed fiscal 2016 (year ends August), with revenues growing 13.4% to $117 billion and earnings per share (EPS) declining 5% to $3.85. The surge in revenues was primarily driven by a strong performance from the Retail Pharmacy business, both in the U.S. and internationally. The company improved its operating margins by 60 basis points, driven by higher pharmacy volumes and increased sales of generic medicines. Interestingly, it successfully beat market expectations with respect to earnings, but fell short of revenue estimates in all quarters of the last fiscal year.

In the upcoming results for the quarter ended November 30th, the consensus expectation is for Walgreens to report revenues of $29.2 billion, implying growth of 0.7% over the same period last year. The company is expected to generate EPS of $1.09, which would imply growth of almost 6% over Q1 FY'16.

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What To Look Out For

The September-November quarter was fairly eventful for Walgreens. The company was added to the Department of Defense's pharmacy network, which should boost its prescription volumes. It also filed a lawsuit against Theranos (Private:THERA) for alleged breach of contract by the latter. Though the company had terminated its contract with Theranos in June 2016, a lawsuit seeking $140 million in damages was filed in November.

Lastly, Walgreens' proposed acquisition of Rite Aid (NYSE:RAD) is still awaiting regulatory approval. The company had extended the deadline for the completion of the merger to early 2017, and recently discussed plans to divest between 500 and 1,000 stores to expedite the approval. In December, Rite Aid entered into an agreement with Fred's (NASDAQ:FRED) to sell 865 stores and assets for $950 million in an all-cash transaction. The proposed sale of assets is subject to regulatory approval. We expect Walgreens to update shareholders on this deal.

Disclosure: No positions.

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Tagged: , Drug Stores, Earnings
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