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Walgreens (WBA) to Report Q3 Earnings: What's in Store?
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Walgreens Boots Alliance, Inc. (WBA - Free Report) is slated to release third-quarter fiscal 2017 results before the market opens on Jun 29.
Last quarter, the company’s earnings were in line with the Zacks Consensus Estimate. In three of the last four quarters, Walgreens Boots’ earnings outpaced the Zacks Consensus Estimate, leading to an average beat of 3.13%. Let’s see how things pan out prior to this announcement.
Factors at Play
Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise
While Walgreens is currently holding its breath and waiting for the Federal Trade Commission (FTC) to declare its final verdict on long-pending acquisition of Rite Aid, the market fails to show much optimism as of now. Notably, the world’s first pharmacy-led, health and wellbeing enterprise witnesses a continuous regulatory hassle with regard to the impending mega acquisition of the U.S. retail pharmacy chain – Rite Aid.
In fact, a Seeking Alpha article estimates the FTC verdict to release the same day as Walgreen’s quarterly performance announcement by stating: “A report is out that acting chief of the Bureau of Competition Tad Lipsky will recommend a lawsuit to block the merger.” If this takes place in reality, the stock price will no doubt sink even if the company manages to post a solid quarterly show.
Meanwhile, let us sneak a peek into what Walgreens’ quarterly earnings have in store for us. Per the last-reported quarter, Walgreens Boots’ Retail Pharmacy USA division has seen the highest comparable prescription growth in over seven years now.Looking ahead, with several recently planned developments as well as the early benefits of new pharmacy contracts which already seem to come through, we expect to view similar growth momentum in third quarter as well.
However, the sales performance of Retail Pharmacy international division was poor in the last-reported quarter. The result was significantly marred in the U.K. due to reduction in government pharmacy funding. In absence of any near-term catalyst, we expect the scenario to remain harsh and challenging in the upcoming quarter too.
We also make a note that slowdown in generic introduction has been affecting the Walgreens Boots’ margins. Of late, an increased reimbursement pressure as well as a generic drug cost inflation have been hampering the company’s margin on a significant level. In the second quarter of 2017 too, Walgreens Boots’ gross margin figures contracted in line with the management’s expectation on account of current reimbursement pressures and the branded drug price inflation.
Besides, management continues to witness lower profitability in Boots UK comparable pharmacy’s gross profit on the back of lower margins in the U.K. Although the company is working tirelessly to increase efficiency and provide high quality, cost-effective pharmacy services, the near-term outlook is still bleak.
On the other hand, market growth is expected to be strong in certain emerging markets backed by the timing of price increase.
Estimate Revision
Please note that Walgreens Boots has seen two downward revisions over the last 30 days. On the contrary, the magnitude of this trend has inched up 0.8% over the same time frame.
Earnings Whispers
Our proven model does not conclusively show that Walgreens Boots is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP as well as a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here, as you will see below.
Zacks ESP: Walgreens Boots has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate as well as the Zacks Consensus Estimate are pegged at $1.31. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Walgreens Boots’ Zacks Rank #3 increases the predictive power of ESP. However, the company’s 0.00% ESP makes a surprise prediction difficult.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may consider as our model shows, they have the right combination of elements to post an earnings beat in the upcoming quarter:
Humana Inc. (HUM - Free Report) has an Earnings ESP of +2.62% and a Zacks Rank #2.
Endocyte, Inc. has an Earnings ESP of +12% and a Zacks Rank #2.
Sell These Stocks. Now.
Just released, today's 220 Zacks Rank #5 Strong Sells demand urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. These sinister companies because many appear to be sound investments. However, from 1988 through 2016, stocks from our Strong Sell list have actually performed 6X worse than the S&P 500. See today's Zacks "Strong Sells" absolutely free >>
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Walgreens (WBA) to Report Q3 Earnings: What's in Store?
Walgreens Boots Alliance, Inc. (WBA - Free Report) is slated to release third-quarter fiscal 2017 results before the market opens on Jun 29.
Last quarter, the company’s earnings were in line with the Zacks Consensus Estimate. In three of the last four quarters, Walgreens Boots’ earnings outpaced the Zacks Consensus Estimate, leading to an average beat of 3.13%. Let’s see how things pan out prior to this announcement.
Factors at Play
Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise
Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise | Walgreens Boots Alliance, Inc. Quote
While Walgreens is currently holding its breath and waiting for the Federal Trade Commission (FTC) to declare its final verdict on long-pending acquisition of Rite Aid, the market fails to show much optimism as of now. Notably, the world’s first pharmacy-led, health and wellbeing enterprise witnesses a continuous regulatory hassle with regard to the impending mega acquisition of the U.S. retail pharmacy chain – Rite Aid.
In fact, a Seeking Alpha article estimates the FTC verdict to release the same day as Walgreen’s quarterly performance announcement by stating: “A report is out that acting chief of the Bureau of Competition Tad Lipsky will recommend a lawsuit to block the merger.” If this takes place in reality, the stock price will no doubt sink even if the company manages to post a solid quarterly show.
Meanwhile, let us sneak a peek into what Walgreens’ quarterly earnings have in store for us. Per the last-reported quarter, Walgreens Boots’ Retail Pharmacy USA division has seen the highest comparable prescription growth in over seven years now.Looking ahead, with several recently planned developments as well as the early benefits of new pharmacy contracts which already seem to come through, we expect to view similar growth momentum in third quarter as well.
However, the sales performance of Retail Pharmacy international division was poor in the last-reported quarter. The result was significantly marred in the U.K. due to reduction in government pharmacy funding. In absence of any near-term catalyst, we expect the scenario to remain harsh and challenging in the upcoming quarter too.
We also make a note that slowdown in generic introduction has been affecting the Walgreens Boots’ margins. Of late, an increased reimbursement pressure as well as a generic drug cost inflation have been hampering the company’s margin on a significant level. In the second quarter of 2017 too, Walgreens Boots’ gross margin figures contracted in line with the management’s expectation on account of current reimbursement pressures and the branded drug price inflation.
Besides, management continues to witness lower profitability in Boots UK comparable pharmacy’s gross profit on the back of lower margins in the U.K. Although the company is working tirelessly to increase efficiency and provide high quality, cost-effective pharmacy services, the near-term outlook is still bleak.
On the other hand, market growth is expected to be strong in certain emerging markets backed by the timing of price increase.
Estimate Revision
Please note that Walgreens Boots has seen two downward revisions over the last 30 days. On the contrary, the magnitude of this trend has inched up 0.8% over the same time frame.
Earnings Whispers
Our proven model does not conclusively show that Walgreens Boots is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP as well as a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here, as you will see below.
Zacks ESP: Walgreens Boots has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate as well as the Zacks Consensus Estimate are pegged at $1.31. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Walgreens Boots’ Zacks Rank #3 increases the predictive power of ESP. However, the company’s 0.00% ESP makes a surprise prediction difficult.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may consider as our model shows, they have the right combination of elements to post an earnings beat in the upcoming quarter:
Align Technology, Inc. (ALGN - Free Report) has an Earnings ESP of +2.74% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Humana Inc. (HUM - Free Report) has an Earnings ESP of +2.62% and a Zacks Rank #2.
Endocyte, Inc. has an Earnings ESP of +12% and a Zacks Rank #2.
Sell These Stocks. Now.
Just released, today's 220 Zacks Rank #5 Strong Sells demand urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. These sinister companies because many appear to be sound investments. However, from 1988 through 2016, stocks from our Strong Sell list have actually performed 6X worse than the S&P 500. See today's Zacks "Strong Sells" absolutely free >>