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Walgreens Boots (WBA) Q4 Earnings Top, Operating Loss Concerns
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Walgreens Boots Alliance, Inc. (WBA - Free Report) reported adjusted earnings per share (EPS) from continuing operations of 80 cents for fourth-quarter fiscal 2022, down 31.6% year over year (down 30% at constant exchange rate or CER). The figure, however, topped the Zacks Consensus Estimate by 2.6%.
GAAP loss from continuing operations for fourth-quarter fiscal 2022 was 48 cents compared with the year-ago quarter’s earnings of 41 cents per share.
For the full year, adjusted EPS from continuing operations was $5.04, a 2.5% rise from fiscal 2021 (up 3.4% at CER). This exceeded the Zacks Consensus Estimate by 0.4%.
Total Sales
Walgreens Boots recorded total sales of $32.45 billion for the fiscal fourth quarter, down 5.3% year over year and 3.2% at CER. The top line lagged the Zacks Consensus Estimate by a marginal 0.1%.
Total revenues for fiscal 2022 were $132.70 billion, up 0.1% from the year-ago period. This also topped the Zacks Consensus Estimate by a nominal 0.03%.
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 $26.68 billion for the fiscal fourth quarter, representing a decline of 7.2% year over year.
Comparable sales increased 1.6% from the year-ago quarter.
Pharmacy sales were down 8.8% from the year-ago quarter, negatively impacted by a 10 basis points (bps) headwind from the AllianceRx Walgreens business.
Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise
Retail sales fell 2.4% and comparable retail sales were down 1.9% year over year. Comparable retail sales (excluding tobacco and e-cigarettes) also declined 1.1% from the prior-year quarter.
International
Revenues at the International division rose 6.6% on a year-over-year basis and 6.7% at CER to $5.14 billion for the fiscal fourth quarter.
Boots UK sales rose 6% year over year. Germany wholesale business sales increased 6.8% in the fiscal fourth quarter.
Boots UK’s comparable retail sales increased 15.2%, driven by market share gains across Personal Care and Health and Wellness.
However, Boots UK comparable pharmacy sales declined 6.9% year over year, primarily due to lower demand for COVID-19 services.
U.S. Healthcare
U.S. Healthcare reported fiscal fourth-quarter revenues of $622 million. This was up 34%on a pro forma basisversus the year-ago quarter’s combined result.
Within the segment, the Shields business rose 48% on a pro forma basis versus their standalone results in the year-ago quarter. The upside was driven by key contract wins, continued partnership growth and a strong focus on execution. Meanwhile, VillageMD increased 31% owing to existing clinic growth and footprint expansion.
Margins
Gross profit for the reported quarter fell 14.6% year over year to $6.41 billion. Gross margin contracted 214.2 bps to 19.8%.
Selling, general and administrative expenses were up 10.1% year over year to $7.32 billion.
The company reported an adjusted operating loss of $909 million for the quarter under review compared to $854 million of operating profit in the year-ago period.
Financial Condition
Walgreens Boots exited fiscal 2022 with cash and cash equivalents of 1.36 billion compared with $559 million recorded in fiscal 2021. Total debt was $11.67 billion at the end of the fiscal, up from $8.98 billion at fiscal 2021 end.
Net cash provided by operating activities at the end of fiscal 2022 was $3.89 billion, down from the year-ago period’s $5.55 billion.
The company initiated its full-year fiscal 2023 adjusted EPS guidance in the range of $4.45 to $4.65. The current Zacks Consensus Estimate is pegged at $4.57.
Our Take
Walgreens Boots exited fourth-quarter fiscal 2022 with better-than-expected earnings. However, earnings declined significantly on a year-over-year basis. Lower COVID-19 vaccination volumes in the reported quarter, macroeconomic headwinds and rising expenses impacted the bottom line. Fourth-quarter sales too missed the Zacks Consensus Estimate and declined on a year-over-year basis, majorly impacted by a 660-bp impact from the anticipated sales decline at AllianceRx Walgreens.
The company’s International segment reported strong growth, banking on a continued rally in the Boots UK business and growth in the company’s German wholesale business.
Walgreens Boots however raised the U.S. Healthcare fiscal 2025 sales target to a band of $11 billion-$12 billion, from $9 billion-$10 billion earlier. The company reaffirmed its expectation to achieve low-teens adjusted EPS growth in fiscal 2025.
Zacks Rank and Upcoming Releases
Walgreens currently carries a Zacks Rank #4 (Sell).
Here are some medical stocks that are due to report soon.
Charles River Laboratories International (CRL - Free Report) company will release third-quarter 2022 results on Nov 2.
Charles River has a long-term historical earnings growth rate of 17.7%. Charles River’s earnings yield of 5.47% compares favorably with the industry’s -2.84%.
McKesson (MCK - Free Report) is scheduled to release third-quarter 2022 results on Nov 1.
McKesson’s long-term historical earnings growth rate is estimated at 14.2%. MCK’s earnings yield of 6.94% compares favorably with the industry’s 5.22%.
Humana (HUM - Free Report) is slated to release third-quarter 2022 results on Nov 2.
Humana’s long-term historical earnings growth rate is estimated at 16.2%. HUM’s earnings yield of 5.02% compares favorably with the industry’s 5.00%.
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Walgreens Boots (WBA) Q4 Earnings Top, Operating Loss Concerns
Walgreens Boots Alliance, Inc. (WBA - Free Report) reported adjusted earnings per share (EPS) from continuing operations of 80 cents for fourth-quarter fiscal 2022, down 31.6% year over year (down 30% at constant exchange rate or CER). The figure, however, topped the Zacks Consensus Estimate by 2.6%.
GAAP loss from continuing operations for fourth-quarter fiscal 2022 was 48 cents compared with the year-ago quarter’s earnings of 41 cents per share.
For the full year, adjusted EPS from continuing operations was $5.04, a 2.5% rise from fiscal 2021 (up 3.4% at CER). This exceeded the Zacks Consensus Estimate by 0.4%.
Total Sales
Walgreens Boots recorded total sales of $32.45 billion for the fiscal fourth quarter, down 5.3% year over year and 3.2% at CER. The top line lagged the Zacks Consensus Estimate by a marginal 0.1%.
Total revenues for fiscal 2022 were $132.70 billion, up 0.1% from the year-ago period. This also topped the Zacks Consensus Estimate by a nominal 0.03%.
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 $26.68 billion for the fiscal fourth quarter, representing a decline of 7.2% year over year.
Comparable sales increased 1.6% from the year-ago quarter.
Pharmacy sales were down 8.8% from the year-ago quarter, negatively impacted by a 10 basis points (bps) headwind from the AllianceRx Walgreens business.
Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise
Walgreens Boots Alliance, Inc. price-consensus-eps-surprise-chart | Walgreens Boots Alliance, Inc. Quote
Retail sales fell 2.4% and comparable retail sales were down 1.9% year over year. Comparable retail sales (excluding tobacco and e-cigarettes) also declined 1.1% from the prior-year quarter.
International
Revenues at the International division rose 6.6% on a year-over-year basis and 6.7% at CER to $5.14 billion for the fiscal fourth quarter.
Boots UK sales rose 6% year over year. Germany wholesale business sales increased 6.8% in the fiscal fourth quarter.
Boots UK’s comparable retail sales increased 15.2%, driven by market share gains across Personal Care and Health and Wellness.
However, Boots UK comparable pharmacy sales declined 6.9% year over year, primarily due to lower demand for COVID-19 services.
U.S. Healthcare
U.S. Healthcare reported fiscal fourth-quarter revenues of $622 million. This was up 34%on a pro forma basisversus the year-ago quarter’s combined result.
Within the segment, the Shields business rose 48% on a pro forma basis versus their standalone results in the year-ago quarter. The upside was driven by key contract wins, continued partnership growth and a strong focus on execution. Meanwhile, VillageMD increased 31% owing to existing clinic growth and footprint expansion.
Margins
Gross profit for the reported quarter fell 14.6% year over year to $6.41 billion. Gross margin contracted 214.2 bps to 19.8%.
Selling, general and administrative expenses were up 10.1% year over year to $7.32 billion.
The company reported an adjusted operating loss of $909 million for the quarter under review compared to $854 million of operating profit in the year-ago period.
Financial Condition
Walgreens Boots exited fiscal 2022 with cash and cash equivalents of 1.36 billion compared with $559 million recorded in fiscal 2021. Total debt was $11.67 billion at the end of the fiscal, up from $8.98 billion at fiscal 2021 end.
Net cash provided by operating activities at the end of fiscal 2022 was $3.89 billion, down from the year-ago period’s $5.55 billion.
The company has a five-year annualized dividend growth rate of 3.75%.
Fiscal 2023 Guidance
The company initiated its full-year fiscal 2023 adjusted EPS guidance in the range of $4.45 to $4.65. The current Zacks Consensus Estimate is pegged at $4.57.
Our Take
Walgreens Boots exited fourth-quarter fiscal 2022 with better-than-expected earnings. However, earnings declined significantly on a year-over-year basis. Lower COVID-19 vaccination volumes in the reported quarter, macroeconomic headwinds and rising expenses impacted the bottom line. Fourth-quarter sales too missed the Zacks Consensus Estimate and declined on a year-over-year basis, majorly impacted by a 660-bp impact from the anticipated sales decline at AllianceRx Walgreens.
The company’s International segment reported strong growth, banking on a continued rally in the Boots UK business and growth in the company’s German wholesale business.
Walgreens Boots however raised the U.S. Healthcare fiscal 2025 sales target to a band of $11 billion-$12 billion, from $9 billion-$10 billion earlier. The company reaffirmed its expectation to achieve low-teens adjusted EPS growth in fiscal 2025.
Zacks Rank and Upcoming Releases
Walgreens currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Here are some medical stocks that are due to report soon.
Charles River Laboratories International (CRL - Free Report) company will release third-quarter 2022 results on Nov 2.
Charles River has a long-term historical earnings growth rate of 17.7%. Charles River’s earnings yield of 5.47% compares favorably with the industry’s -2.84%.
McKesson (MCK - Free Report) is scheduled to release third-quarter 2022 results on Nov 1.
McKesson’s long-term historical earnings growth rate is estimated at 14.2%. MCK’s earnings yield of 6.94% compares favorably with the industry’s 5.22%.
Humana (HUM - Free Report) is slated to release third-quarter 2022 results on Nov 2.
Humana’s long-term historical earnings growth rate is estimated at 16.2%. HUM’s earnings yield of 5.02% compares favorably with the industry’s 5.00%.