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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 strategic collaborations and noteworthy product launches. The company ended the fourth quarter of fiscal 2022 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 16.7% compared with 1.8% fall of the industry and a 15.6% plunge of the S&P 500.
The renowned pharmacy-led health and beauty retail company has a market capitalization of $35.41 billion. The company’s earnings surpassed estimates in all trailing four quarters, delivering a surprise of 10.6% on average. However, the company’s long-term projected growth rate of 3% remains behind the industry’s growth projection of 5.2%.
Let’s delve deeper.
Factors At Play
Q4 Upsides: Walgreens Boots exited fiscal 2022 with better-than-expected earnings and revenues. Retail comp sales in the United States and Boots UK were both strong, with the United States up 6% and Boots up 19% over fiscal 2021. Several of the company’s initiatives continued to gain traction. U.S. digital sales grew 37% for the year on top of 74% growth in 2021. myWalgreens membership surge crossed a big milestone, reaching 102 million customers. Added to this, VillageMD and Blue Shields continued to realize tremendous top-line growth in 2022, driving pro forma total growth of 75% for the year.
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.
The company is progressing well with respect to three major partnerships with VillageMD, Shields and CareCentrix. VillageMD is progressing with value-based care for the nation with over 340 clinics now open, including about 150 co-located with Walgreens Boots, with a target of 200 by the end of the calendar year 2022. Through the company’s accelerated rollout, VillageMD already covers 433,000 lives under value-based arrangements, including 161,000 Medicare and MA value-based lives. At the same time, CareCentrix has 19 million total contracted lives and Shields is partnered with 75 health systems.
Product Launches: Walgreens Boots’ product launches in the past few months raise our optimism. In June 2022, Walgreens launched its clinical trial business to redefine the patient experience and bolster access and retention in sponsor-led drug development research. The new business will address patient recruitment and enrollment-related challenges in clinical trials, which were further exacerbated by the COVID-19 pandemic.
Image Source: Zacks Investment Research
In March 2022, Walgreens, in collaboration with Laboratory Corporation of America Holdings, announced the nationwide availability of “Pixel by LabCorp COVID-19 at-home collection kit” at no cost to individuals who meet clinical guidelines.
Downsides
Pressure on Margin Continues: In the last few years, a slowdown in the generic introduction has been affecting Walgreens Boots’ margins. In addition, 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 in the form of 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 2022 earnings has moved 3.6% down to $4.51.
The Zacks Consensus Estimate for fiscal 2023 revenues is pegged at $1323.12 billion, suggesting a 0.3% rise from the year-ago reported number.
Key Picks
Few other better-ranked stocks in the broader medical space that investors can consider are ShockWave Medical, Inc. , Orthofix Medical Inc. (OFIX - Free Report) and Merit Medical System (MMSI - Free Report) .
ShockWave Medical, sporting a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has outperformed its industry in the past year. SWAV has gained 35% against the industry’s 32.6% fall in the past year.
Orthofix Medical currently carrying a Zacks Rank #1 (Strong Buy), reported third-quarter 2022 adjusted EPS of 13 cents, which beat the Zacks Consensus Estimate by a stupendous 550%. Revenues of $114 million outpaced the consensus mark by 2.7%.
Orthofix Medical has an estimated next-year growth rate of 58.97%. OFIXI’s earnings surpassed estimates in the trailing three quarters and missed in one, the average being 129.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Merit Medical, currently carrying a Zacks Rank of 2, reported third-quarter 2022 adjusted EPS of 64 cents, which beat the Zacks Consensus Estimate by 20.8%. Revenues of $287.2 million outpaced the consensus mark by 5.2%.
Merit Medical has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average being 25.4%.
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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 strategic collaborations and noteworthy product launches. The company ended the fourth quarter of fiscal 2022 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 16.7% compared with 1.8% fall of the industry and a 15.6% plunge of the S&P 500.
The renowned pharmacy-led health and beauty retail company has a market capitalization of $35.41 billion. The company’s earnings surpassed estimates in all trailing four quarters, delivering a surprise of 10.6% on average. However, the company’s long-term projected growth rate of 3% remains behind the industry’s growth projection of 5.2%.
Let’s delve deeper.
Factors At Play
Q4 Upsides: Walgreens Boots exited fiscal 2022 with better-than-expected earnings and revenues. Retail comp sales in the United States and Boots UK were both strong, with the United States up 6% and Boots up 19% over fiscal 2021. Several of the company’s initiatives continued to gain traction. U.S. digital sales grew 37% for the year on top of 74% growth in 2021. myWalgreens membership surge crossed a big milestone, reaching 102 million customers. Added to this, VillageMD and Blue Shields continued to realize tremendous top-line growth in 2022, driving pro forma total growth of 75% for the year.
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.
The company is progressing well with respect to three major partnerships with VillageMD, Shields and CareCentrix. VillageMD is progressing with value-based care for the nation with over 340 clinics now open, including about 150 co-located with Walgreens Boots, with a target of 200 by the end of the calendar year 2022. Through the company’s accelerated rollout, VillageMD already covers 433,000 lives under value-based arrangements, including 161,000 Medicare and MA value-based lives. At the same time, CareCentrix has 19 million total contracted lives and Shields is partnered with 75 health systems.
Product Launches: Walgreens Boots’ product launches in the past few months raise our optimism. In June 2022, Walgreens launched its clinical trial business to redefine the patient experience and bolster access and retention in sponsor-led drug development research. The new business will address patient recruitment and enrollment-related challenges in clinical trials, which were further exacerbated by the COVID-19 pandemic.
Image Source: Zacks Investment Research
In March 2022, Walgreens, in collaboration with Laboratory Corporation of America Holdings, announced the nationwide availability of “Pixel by LabCorp COVID-19 at-home collection kit” at no cost to individuals who meet clinical guidelines.
Downsides
Pressure on Margin Continues: In the last few years, a slowdown in the generic introduction has been affecting Walgreens Boots’ margins. In addition, 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 in the form of 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 2022 earnings has moved 3.6% down to $4.51.
The Zacks Consensus Estimate for fiscal 2023 revenues is pegged at $1323.12 billion, suggesting a 0.3% rise from the year-ago reported number.
Key Picks
Few other better-ranked stocks in the broader medical space that investors can consider are ShockWave Medical, Inc. , Orthofix Medical Inc. (OFIX - Free Report) and Merit Medical System (MMSI - Free Report) .
ShockWave Medical, sporting a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has outperformed its industry in the past year. SWAV has gained 35% against the industry’s 32.6% fall in the past year.
Orthofix Medical currently carrying a Zacks Rank #1 (Strong Buy), reported third-quarter 2022 adjusted EPS of 13 cents, which beat the Zacks Consensus Estimate by a stupendous 550%. Revenues of $114 million outpaced the consensus mark by 2.7%.
Orthofix Medical has an estimated next-year growth rate of 58.97%. OFIXI’s earnings surpassed estimates in the trailing three quarters and missed in one, the average being 129.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Merit Medical, currently carrying a Zacks Rank of 2, reported third-quarter 2022 adjusted EPS of 64 cents, which beat the Zacks Consensus Estimate by 20.8%. Revenues of $287.2 million outpaced the consensus mark by 5.2%.
Merit Medical has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average being 25.4%.