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Walgreens Boots (WBA) Q4 Earnings Miss Estimates, Margins Down
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Walgreens Boots Alliance, Inc. (WBA - Free Report) delivered adjusted earnings per share (EPS) of 67 cents in fourth-quarter fiscal 2023, decreasing 16.3% from the year-ago quarter’s figure (down 18% at constant exchange rate or CER). The figure missed the Zacks Consensus Estimate by 1.5%.
GAAP EPS for fourth-quarter fiscal 2023 was 21 cents compared with the year-ago quarter’s 48 cents, plunging 56.3%.
For the full year, adjusted EPS was $3.98, a 21% decline from fiscal 2022 (down 20.3% at CER). This lagged the Zacks Consensus Estimate by 0.3%.
Total Sales
Walgreens Boots recorded total sales of $35.42 billion in the fiscal fourth quarter, up 9.2% year over year and 8.3% at CER. The top line also surpassed the Zacks Consensus Estimate by 2.5%.
Total revenues for fiscal 2023 were $139.1 billion, up 4.8% from the year-ago period. This also topped the Zacks Consensus Estimate by 0.6%.
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 U.S. Healthcare.
U.S. Retail Pharmacy
The segment’s sales totaled $27.7 billion in the fiscal fourth quarter, up 3.7% year over year.
Comparable sales increased 5.7% from the year-ago quarter’s levels. Pharmacy sales were up 6.4% from the year-ago quarter’s figures and comparable pharmacy sales increased 92% based on branded drug inflation and mi impact.
Retail sales fell 4.3% and comparable retail sales were down 3.3% year over year, reflecting macroeconomic-driven consumer pressure, a 1.0 percentage point impact from a weaker respiratory season and a 1.6 percentage point impact from lower sales of COVID-19 OTC test kits. This figure compares with our fourth quarter’s U.S. Retail Pharmacy model’s projection of $26.6 million.
International
Revenues in the International division rose 12.4% on a year-over-year basis and increased 6.7% at CER to $5.78 billion in the fiscal fourth quarter.
Boots UK sales rose 10.9% year over year. In Germany, wholesale business sales increased 3.5% in the fiscal fourth quarter.
Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise
Boots UK’s comparable retail sales increased 11.7%. However, Boots UK’s comparable pharmacy sales rose 9.9% year over year. This figure compares with our fourth quarter’s International business model’s projection of $5.63 billion.
U.S. Healthcare
U.S. Healthcare reported fiscal fourth-quarter revenues of $2.0 billion. The metric was up 19% on a pro-forma basis from the year-ago quarter’s combined result.
Within the segment, the Shields business rose 29%, driven by recent contract wins, further expansion of existing partnerships and strong execution focus.
CareCentrix pro forma sales increased 24% due to additional service offerings and expansion into additional markets with existing partners. VillageMD grew 17 percent, reflecting existing clinic growth and clinic footprint expansion. This figure compares with our fourth quarter’s U.S. Healthcare business model’s projection of $1.72 billion.
Margins
Gross profit for the reported quarter rose 0.9% year over year to $6.47 billion. Gross margin contracted 148 bps to 18.3%.
Selling, general and administrative expenses fell 4.5% year over year to $6.99 billion.
The company reported an adjusted operating loss of $516 billion for the quarter compared with $909 billion in the year-ago period.
Financial Condition
Walgreens Boots exited 2023 with cash and cash equivalents of $728 million compared with $1.36 billion recorded in fiscal 2022. Total debt was $9.06 billion at the end of the fiscal2023, down from $11.67 billion at 2022-end.
Net cash provided by operating activities at the end of 2023 was $2.26 million, down from the year-ago period’s $3.89 billion.
Adjusted EPS guidance is expected in the $3.20-$3.50 range. The current Zacks Consensus Estimate is pegged at $3.72.
The company expects revenues to be $141 to $141.5 billion. The current Zacks Consensus Estimate is pegged at $143.5 billion.
Our Take
Walgreens Boots exited fourth-quarter fiscal 2023 on a mixed note with better-than-expected revenues and earning miss. The company’s U.S. Healthcare business grew, led by key contract wins, continued partnership growth and a strong focus on execution. During the reported quarter, VillageMD registered strong growth, reflecting existing clinic growth and clinic footprint expansion.
However, Retail sales were impacted by macroeconomic-driven consumer pressure, a 1.0 percentage point impact from a weaker respiratory season and a 1.6 percentage point impact from lower sales of COVID-19 OTC test kits. Escalating costs and contraction of gross margin are a concern.
Zacks Rank & Key Picks
Walgreens Boots currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the broader medical space that are supposed to report earnings soon are DaVita Inc. (DVA - Free Report) , Align Technology (ALGN - Free Report) , and Boston Scientific Corporation (BSX - Free Report) .
The Zacks Consensus Estimate for DaVita’s third-quarter 2023 adjusted EPS is currently pegged at $1.92. The consensus estimate for revenues is pegged at $3 billion. DVA currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DaVita has an estimated long-term growth rate of 12.7%. DVA’s earnings yield of 7.9% compares favorably with the industry’s 4.4%.
Align currently has a Zacks Rank #2. The Zacks Consensus Estimate for third-quarter 2023 adjusted EPS is currently pegged at $2.27. The same for revenues is pegged at $1 billion.
ALGN has an estimated long-term growth rate of 17.5%. ALGN’s earnings yield of 3.09% compares favorably with the industry’s yield.
Boston Scientific currently carries a Zacks Rank #2. The Zacks Consensus Estimate for its third-quarter 2023 adjusted EPS is currently pegged at 48 cents. The same for its revenues stands at $3.47 billion.
BSX has an estimated long-term growth rate of 12.8%. Boston Scientific’s earnings yield of 3.9% compares favorably with the industry’s negative yield.
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Walgreens Boots (WBA) Q4 Earnings Miss Estimates, Margins Down
Walgreens Boots Alliance, Inc. (WBA - Free Report) delivered adjusted earnings per share (EPS) of 67 cents in fourth-quarter fiscal 2023, decreasing 16.3% from the year-ago quarter’s figure (down 18% at constant exchange rate or CER). The figure missed the Zacks Consensus Estimate by 1.5%.
GAAP EPS for fourth-quarter fiscal 2023 was 21 cents compared with the year-ago quarter’s 48 cents, plunging 56.3%.
For the full year, adjusted EPS was $3.98, a 21% decline from fiscal 2022 (down 20.3% at CER). This lagged the Zacks Consensus Estimate by 0.3%.
Total Sales
Walgreens Boots recorded total sales of $35.42 billion in the fiscal fourth quarter, up 9.2% year over year and 8.3% at CER. The top line also surpassed the Zacks Consensus Estimate by 2.5%.
Total revenues for fiscal 2023 were $139.1 billion, up 4.8% from the year-ago period. This also topped the Zacks Consensus Estimate by 0.6%.
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 U.S. Healthcare.
U.S. Retail Pharmacy
The segment’s sales totaled $27.7 billion in the fiscal fourth quarter, up 3.7% year over year.
Comparable sales increased 5.7% from the year-ago quarter’s levels.
Pharmacy sales were up 6.4% from the year-ago quarter’s figures and comparable pharmacy sales increased 92% based on branded drug inflation and mi impact.
Retail sales fell 4.3% and comparable retail sales were down 3.3% year over year, reflecting macroeconomic-driven consumer pressure, a 1.0 percentage point impact from a weaker respiratory season and a 1.6 percentage point impact from lower sales of COVID-19 OTC test kits. This figure compares with our fourth quarter’s U.S. Retail Pharmacy model’s projection of $26.6 million.
International
Revenues in the International division rose 12.4% on a year-over-year basis and increased 6.7% at CER to $5.78 billion in the fiscal fourth quarter.
Boots UK sales rose 10.9% year over year. In Germany, wholesale business sales increased 3.5% in the fiscal fourth quarter.
Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise
Walgreens Boots Alliance, Inc. price-consensus-eps-surprise-chart | Walgreens Boots Alliance, Inc. Quote
Boots UK’s comparable retail sales increased 11.7%. However, Boots UK’s comparable pharmacy sales rose 9.9% year over year. This figure compares with our fourth quarter’s International business model’s projection of $5.63 billion.
U.S. Healthcare
U.S. Healthcare reported fiscal fourth-quarter revenues of $2.0 billion. The metric was up 19% on a pro-forma basis from the year-ago quarter’s combined result.
Within the segment, the Shields business rose 29%, driven by recent contract wins, further expansion of existing partnerships and strong execution focus.
CareCentrix pro forma sales increased 24% due to additional service offerings and expansion into additional markets with existing partners. VillageMD grew 17 percent, reflecting existing clinic growth and clinic footprint expansion. This figure compares with our fourth quarter’s U.S. Healthcare business model’s projection of $1.72 billion.
Margins
Gross profit for the reported quarter rose 0.9% year over year to $6.47 billion. Gross margin contracted 148 bps to 18.3%.
Selling, general and administrative expenses fell 4.5% year over year to $6.99 billion.
The company reported an adjusted operating loss of $516 billion for the quarter compared with $909 billion in the year-ago period.
Financial Condition
Walgreens Boots exited 2023 with cash and cash equivalents of $728 million compared with $1.36 billion recorded in fiscal 2022. Total debt was $9.06 billion at the end of the fiscal2023, down from $11.67 billion at 2022-end.
Net cash provided by operating activities at the end of 2023 was $2.26 million, down from the year-ago period’s $3.89 billion.
The company has a five-year annualized dividend growth rate of 1.96%.
Fiscal 2024 Guidance
The company provided 2024 guidance
Adjusted EPS guidance is expected in the $3.20-$3.50 range. The current Zacks Consensus Estimate is pegged at $3.72.
The company expects revenues to be $141 to $141.5 billion. The current Zacks Consensus Estimate is pegged at $143.5 billion.
Our Take
Walgreens Boots exited fourth-quarter fiscal 2023 on a mixed note with better-than-expected revenues and earning miss. The company’s U.S. Healthcare business grew, led by key contract wins, continued partnership growth and a strong focus on execution. During the reported quarter, VillageMD registered strong growth, reflecting existing clinic growth and clinic footprint expansion.
However, Retail sales were impacted by macroeconomic-driven consumer pressure, a 1.0 percentage point impact from a weaker respiratory season and a 1.6 percentage point impact from lower sales of COVID-19 OTC test kits. Escalating costs and contraction of gross margin are a concern.
Zacks Rank & Key Picks
Walgreens Boots currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the broader medical space that are supposed to report earnings soon are DaVita Inc. (DVA - Free Report) , Align Technology (ALGN - Free Report) , and Boston Scientific Corporation (BSX - Free Report) .
The Zacks Consensus Estimate for DaVita’s third-quarter 2023 adjusted EPS is currently pegged at $1.92. The consensus estimate for revenues is pegged at $3 billion. DVA currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DaVita has an estimated long-term growth rate of 12.7%. DVA’s earnings yield of 7.9% compares favorably with the industry’s 4.4%.
Align currently has a Zacks Rank #2. The Zacks Consensus Estimate for third-quarter 2023 adjusted EPS is currently pegged at $2.27. The same for revenues is pegged at $1 billion.
ALGN has an estimated long-term growth rate of 17.5%. ALGN’s earnings yield of 3.09% compares favorably with the industry’s yield.
Boston Scientific currently carries a Zacks Rank #2. The Zacks Consensus Estimate for its third-quarter 2023 adjusted EPS is currently pegged at 48 cents. The same for its revenues stands at $3.47 billion.
BSX has an estimated long-term growth rate of 12.8%. Boston Scientific’s earnings yield of 3.9% compares favorably with the industry’s negative yield.