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Walgreens Boots (WBA) Beats on Earnings in Q2, Lifts View
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Walgreens Boots Alliance, Inc. (WBA - Free Report) reported adjusted earnings per share (EPS) of $1.73 in second-quarter fiscal 2018, up 27.2% year over year and 25.7% at constant exchange rate (CER). The figure surpassed the Zacks Consensus Estimate of $1.55.
On a reported basis, net earnings came in at $1.3 billion, reflecting an increase of 27.3% from the prior-year quarter. Reported EPS came in at $1.36, up 38.8% on a year-over-year basis.
Total Sales
Walgreens Boots recorded total sales of $33.02 billion in the fiscal second quarter, up 12.1% year over year and 9.4% at CER. The top line outpaced the Zacks Consensus Estimate of $31.99 billion.
Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise
Walgreens Boots reports under three operating segments: Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale.
Retail Pharmacy USA
The segment recorded sales of $24.5 billion in the second quarter, highlighting an improvement of 12.2% year over year. Within this segment, total sales at comparable drugstores rose 2.4%, while prescriptions filled in comparable stores grew 4% on account of Medicare Part D growth and volume growth from strategic pharmacy collaborations. Comparable retail sales dropped 2.7%.
Pharmacy sales, which accounted for 70.3% of the Retail Pharmacy USA division’s sales in the quarter, increased 18.7% from the year-ago quarter. Pharmacy sales at comparable stores rose 5.1% on higher volumes.
Retail Pharmacy International
Revenues at the Retail Pharmacy International division rose 7% on a year-over-year basis (down 2.6% at CER) to $3.3 billion owing to currency fluctuations. At CER, comparable store sales in the second quarter declined 1.7% year over year along with a 0.6% uptick in comparable pharmacy sales.
Pharmaceutical Wholesale
The Pharmaceutical Wholesale division recorded quarterly sales of $5.8 billion, up 14.4% year over year (up 3.4% at CER).
Margins
Gross profit in the reported quarter increased 7.1% year over year to $8.09 billion. However, gross margin contracted 116 basis points (bps) to 24.5%.
Selling, general and administrative (SG&A) expenses were up 3.2% year over year to $6.32 billion. However, adjusted operating income increased 23.7% to $1.78 billion. Adjusted operating margin contracted 50 bps to 5.4%.
Financial Condition
Walgreens Boots exited the second quarter with cash and cash equivalents of $1.75 billion, compared with $1.83 billion at the end of the first quarter. Long-term debt was $12.53 billion, compared with $12.73 billion at the end of the preceding quarter.
Year to date, the company has generated operating cash flow of $3.18 billion, compared with $3.38 billion a year ago. The resultant free cash flow was $2.51 billion.
Guidance Raised
Walgreens Boots has raised the low and high ends of its outlook for fiscal 2018 EPS to $5.85 to $6.05 from $5.45 to $5.70. The Zacks Consensus Estimate for earnings is pegged at $5.79, below the company’s guided range.
The company now expects cash tax benefit from U.S. tax law changes in excess of $350 million in fiscal 2018, compared with the previously announced estimate of more than $200 million.
Our Take
Walgreens Boots reported an impressive second quarter of fiscal 2018. The year-over-year increase in earnings and revenues is encouraging as well.
Also, in a bid to ensure availability of specialty brand drugs, Express Scriptsand Walgreens Boots recently announced plans to expand their existing group purchasing efforts.
We are encouraged to note that in the reported quarter, the company witnessed highest sales growth in the last eight quarters. The company is also upbeat about the recent acquisition of stores from Rite Aid. Also, the solid guidance buoys optimism.
Zacks Rank & Key Picks
Walgreens Boots carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical sector are Bio-Rad Laboratories (BIO - Free Report) , athenahealth, Inc. and Edwards Lifesciences Corporation (EW - Free Report) .
athenahealth is a Zacks #1 Ranked player. The company has a long-term expected earnings growth rate of 21.5%.
Edwards Lifesciences has a long-term expected earnings growth rate of 15.1%. The stock has a Zacks Rank of 2 (Buy).
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Walgreens Boots (WBA) Beats on Earnings in Q2, Lifts View
Walgreens Boots Alliance, Inc. (WBA - Free Report) reported adjusted earnings per share (EPS) of $1.73 in second-quarter fiscal 2018, up 27.2% year over year and 25.7% at constant exchange rate (CER). The figure surpassed the Zacks Consensus Estimate of $1.55.
On a reported basis, net earnings came in at $1.3 billion, reflecting an increase of 27.3% from the prior-year quarter. Reported EPS came in at $1.36, up 38.8% on a year-over-year basis.
Total Sales
Walgreens Boots recorded total sales of $33.02 billion in the fiscal second quarter, up 12.1% year over year and 9.4% at CER. The top line outpaced the Zacks Consensus Estimate of $31.99 billion.
Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise
Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise | Walgreens Boots Alliance, Inc. Quote
Segments in Detail
Walgreens Boots reports under three operating segments: Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale.
Retail Pharmacy USA
The segment recorded sales of $24.5 billion in the second quarter, highlighting an improvement of 12.2% year over year. Within this segment, total sales at comparable drugstores rose 2.4%, while prescriptions filled in comparable stores grew 4% on account of Medicare Part D growth and volume growth from strategic pharmacy collaborations. Comparable retail sales dropped 2.7%.
Pharmacy sales, which accounted for 70.3% of the Retail Pharmacy USA division’s sales in the quarter, increased 18.7% from the year-ago quarter. Pharmacy sales at comparable stores rose 5.1% on higher volumes.
Retail Pharmacy International
Revenues at the Retail Pharmacy International division rose 7% on a year-over-year basis (down 2.6% at CER) to $3.3 billion owing to currency fluctuations. At CER, comparable store sales in the second quarter declined 1.7% year over year along with a 0.6% uptick in comparable pharmacy sales.
Pharmaceutical Wholesale
The Pharmaceutical Wholesale division recorded quarterly sales of $5.8 billion, up 14.4% year over year (up 3.4% at CER).
Margins
Gross profit in the reported quarter increased 7.1% year over year to $8.09 billion. However, gross margin contracted 116 basis points (bps) to 24.5%.
Selling, general and administrative (SG&A) expenses were up 3.2% year over year to $6.32 billion. However, adjusted operating income increased 23.7% to $1.78 billion. Adjusted operating margin contracted 50 bps to 5.4%.
Financial Condition
Walgreens Boots exited the second quarter with cash and cash equivalents of $1.75 billion, compared with $1.83 billion at the end of the first quarter. Long-term debt was $12.53 billion, compared with $12.73 billion at the end of the preceding quarter.
Year to date, the company has generated operating cash flow of $3.18 billion, compared with $3.38 billion a year ago. The resultant free cash flow was $2.51 billion.
Guidance Raised
Walgreens Boots has raised the low and high ends of its outlook for fiscal 2018 EPS to $5.85 to $6.05 from $5.45 to $5.70. The Zacks Consensus Estimate for earnings is pegged at $5.79, below the company’s guided range.
The company now expects cash tax benefit from U.S. tax law changes in excess of $350 million in fiscal 2018, compared with the previously announced estimate of more than $200 million.
Our Take
Walgreens Boots reported an impressive second quarter of fiscal 2018. The year-over-year increase in earnings and revenues is encouraging as well.
Also, in a bid to ensure availability of specialty brand drugs, Express Scriptsand Walgreens Boots recently announced plans to expand their existing group purchasing efforts.
We are encouraged to note that in the reported quarter, the company witnessed highest sales growth in the last eight quarters. The company is also upbeat about the recent acquisition of stores from Rite Aid. Also, the solid guidance buoys optimism.
Zacks Rank & Key Picks
Walgreens Boots carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical sector are Bio-Rad Laboratories (BIO - Free Report) , athenahealth, Inc. and Edwards Lifesciences Corporation (EW - Free Report) .
Bio-Rad Laboratories sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The company has a long-term expected earnings growth rate of 20%.
athenahealth is a Zacks #1 Ranked player. The company has a long-term expected earnings growth rate of 21.5%.
Edwards Lifesciences has a long-term expected earnings growth rate of 15.1%. The stock has a Zacks Rank of 2 (Buy).
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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