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Walgreens Earnings Preview: Can WBA Stock Rebound?
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Walgreens Boots Alliance (WBA - Free Report) has largely struggled while competitor CVS Health (CVS - Free Report) has been somewhat of an investment darling over the last few years. WBA investors are hoping the stock can rebound.
WBA’s fiscal fourth quarter earnings release on Thursday, October 13 will be closely monitored as many businesses struggle amid rising inflation and tougher operating environments.
Overview
Trading 42% off its 52-week highs, it will be important to see if Walgreens was able to have another strong quarter despite inflationary concerns. WBA has beaten earnings expectations for eight consecutive quarters. Another earnings beat during the economic downturn could boost investors’ confidence in WBA stock. But despite the run of beats, earnings estimates have continued to decline. This means that investors will want to see some upbeat guidance more than anything else.
Investors will also want to pay attention to WBA’s international growth and the continued benefits of the merger with Britain’s biggest pharmacy chain, Alliance Boots. Upon completing the merger in 2014, Walgreens Boots Alliance is now an integrated healthcare company, and pharmacy retailer servicing millions of customers and patients daily. The Walgreens Boots Alliance merger created the world’s first pharmacy-led, health and well-being enterprise.
Last quarter Boots UK sales grew 13.5% and its German wholesale business grew 6.8%.
Performance
At current levels, WBA stock could be approaching oversold territory and an earnings beat along with positive guidance could give the stock a much-needed boost.
WBA is down -38% year to date, with much of the painful decline transpiring over the last quarter as inflationary concerns began crippling the stock along with the broader market. WBA’s YTD performance lags the S&P 500’s -24% and competitor CVS’s -13%.
Image Source: Zacks Investment Research
Unfortunately, WBA’s lackluster performance started before rising inflation begin hindering the broader market. WBA stock is down -41% over the last three years to underperform the benchmark’s +24% and CVS’s impressive +41%.
WBA stock is up +127% over the last 25 years vs. the benchmark’s +380%. Despite the purgatory-like performance of the stock, WBA could possibly bounce back if Wall Street starts to find real value.
Image Source: Zacks Investment Research
Valuation
Currently trading around $31 a share, WBA has a forward P/E of 6.6X. This is on par with the industry average. This is also much lower than its decade high of 25.5X and median of 12.4X.
WBA also has an EV/EBITDA of 6.5X, which is lower than the industry average of 7.3X, and competitor CVS’s 7.2X. This is an indicator that WBA has very sustainable levels and a solid cash position.
WBA is starting to look attractive relative to its past and its EV/EBITDA is promising when considering rising inflation and operation costs.
Image Source: Zacks Investment Research
Outlook
The Zacks Consensus Estimate for WBA’s fiscal Q4 earnings is $0.78 a share, which would represent a 33% decrease from fiscal Q4 2021. Sales are also expected to decline 5% at $32.49 billion. It is important to note that estimates for the quarter have declined over the last two months.
Year over year, WBA is projected to see earnings slump 5% in 2022, with its FY23 earnings set to fall another 8%. Sales are also expected to be down 3% in FY22 but rise 1% in FY23 to $133.82 billion.
Operations costs appear to be weighing on the company’s earnings as indicated in WBA’s FY23 outlook. This is something investors will also want to pay attention to during the quarterly release regarding its FY23 guidance. WBA is expected to have 5% earnings growth over the next five years.
Bottom Line
Although Walgreen Boots Alliance is starting to look more attractive from a valuation perspective there could be more risks ahead. WBA currently lands a Zacks Rank #4 (Sell) in correlation with downward earnings estimate revisions for the current quarter, FY22, and FY23.
WBA may eventually have more upside but there could be more turbulence ahead. Competition from CVS has weighed on WBA stock over the years. While CVS is expected to see earnings growth for this year and FY23, operation costs appear to be weighing on WBA’s earnings and the stock.
One thing is for certain, WBA could use another earnings beat and strong guidance in hopes of an eventual rebound.
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Walgreens Earnings Preview: Can WBA Stock Rebound?
Walgreens Boots Alliance (WBA - Free Report) has largely struggled while competitor CVS Health (CVS - Free Report) has been somewhat of an investment darling over the last few years. WBA investors are hoping the stock can rebound.
WBA’s fiscal fourth quarter earnings release on Thursday, October 13 will be closely monitored as many businesses struggle amid rising inflation and tougher operating environments.
Overview
Trading 42% off its 52-week highs, it will be important to see if Walgreens was able to have another strong quarter despite inflationary concerns. WBA has beaten earnings expectations for eight consecutive quarters. Another earnings beat during the economic downturn could boost investors’ confidence in WBA stock. But despite the run of beats, earnings estimates have continued to decline. This means that investors will want to see some upbeat guidance more than anything else.
Investors will also want to pay attention to WBA’s international growth and the continued benefits of the merger with Britain’s biggest pharmacy chain, Alliance Boots. Upon completing the merger in 2014, Walgreens Boots Alliance is now an integrated healthcare company, and pharmacy retailer servicing millions of customers and patients daily. The Walgreens Boots Alliance merger created the world’s first pharmacy-led, health and well-being enterprise.
Last quarter Boots UK sales grew 13.5% and its German wholesale business grew 6.8%.
Performance
At current levels, WBA stock could be approaching oversold territory and an earnings beat along with positive guidance could give the stock a much-needed boost.
WBA is down -38% year to date, with much of the painful decline transpiring over the last quarter as inflationary concerns began crippling the stock along with the broader market. WBA’s YTD performance lags the S&P 500’s -24% and competitor CVS’s -13%.
Image Source: Zacks Investment Research
Unfortunately, WBA’s lackluster performance started before rising inflation begin hindering the broader market. WBA stock is down -41% over the last three years to underperform the benchmark’s +24% and CVS’s impressive +41%.
WBA stock is up +127% over the last 25 years vs. the benchmark’s +380%. Despite the purgatory-like performance of the stock, WBA could possibly bounce back if Wall Street starts to find real value.
Image Source: Zacks Investment Research
Valuation
Currently trading around $31 a share, WBA has a forward P/E of 6.6X. This is on par with the industry average. This is also much lower than its decade high of 25.5X and median of 12.4X.
WBA also has an EV/EBITDA of 6.5X, which is lower than the industry average of 7.3X, and competitor CVS’s 7.2X. This is an indicator that WBA has very sustainable levels and a solid cash position.
WBA is starting to look attractive relative to its past and its EV/EBITDA is promising when considering rising inflation and operation costs.
Image Source: Zacks Investment Research
Outlook
The Zacks Consensus Estimate for WBA’s fiscal Q4 earnings is $0.78 a share, which would represent a 33% decrease from fiscal Q4 2021. Sales are also expected to decline 5% at $32.49 billion. It is important to note that estimates for the quarter have declined over the last two months.
Year over year, WBA is projected to see earnings slump 5% in 2022, with its FY23 earnings set to fall another 8%. Sales are also expected to be down 3% in FY22 but rise 1% in FY23 to $133.82 billion.
Operations costs appear to be weighing on the company’s earnings as indicated in WBA’s FY23 outlook. This is something investors will also want to pay attention to during the quarterly release regarding its FY23 guidance. WBA is expected to have 5% earnings growth over the next five years.
Bottom Line
Although Walgreen Boots Alliance is starting to look more attractive from a valuation perspective there could be more risks ahead. WBA currently lands a Zacks Rank #4 (Sell) in correlation with downward earnings estimate revisions for the current quarter, FY22, and FY23.
WBA may eventually have more upside but there could be more turbulence ahead. Competition from CVS has weighed on WBA stock over the years. While CVS is expected to see earnings growth for this year and FY23, operation costs appear to be weighing on WBA’s earnings and the stock.
One thing is for certain, WBA could use another earnings beat and strong guidance in hopes of an eventual rebound.