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Will Walgreens (WBA) Post Dull Retail Numbers in Q4 Earnings?
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Walgreens Boots Alliance, Inc. (WBA - Free Report) is slated to release fourth-quarter fiscal 2020 results on Oct 15, before market open.
In the last reported quarter, the company reported a negative earnings surprise of 24.55%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on two occasions and missed in the other two, the average miss being 5.11%. Let’s take a look at how things have shaped up prior to this announcement.
Factors at Play
Through the fiscal fourth quarter (June to August 2020), shares of Walgreens declined consistently on the coronavirus-led economic crisis that has pushed traditional bricks-and-mortar retail stores into huge uncertainty. Although the fourth quarter witnessed the lifting of restrictions in many regions, the company is somewhat doubtful about any stark rebound in its business as certain aspects of customer behavior are likely to permanently change.
This might have continued to result in a sales drop for the company across its Retail Pharmacy USA division in the quarter to be reported.
Per the company’s earlier announcement, the U.S. retail comp sales growth projection for the fourth quarter was around 2-3%. However, it also apprehended about an adverse category mix that might have dampened the growth.
Walgreens Boots Alliance, Inc. Price and EPS Surprise
The situation was graver for the company’s international businesses during these months with international trade mostly remaining at a standstill. In the last reported quarter, the company faced a significant decline in footfall across most of its markets in retail pharmacy international, especially in the U.K. With the resurgence of coronavirus cases in this region once again in the fiscal fourth quarter, sales in the company’s Retail Pharmacy International division are once again expected to have suffered heavily.
Per the company’s earlier announcement, the Boots UK retail comps were projected to decline around 40% in the fourth quarter, with retail gross margins to be down around 400-500 basis points. This projection was based on growing fulfillment costs reflecting a significant increase in online sales and home delivery. These assumptions might have led to an adverse COVID operating income impact of around $500-$575 million for the fourth quarter, with nearly 60% from the company’s international business.
In this regard, we note that though the pandemic-related impact was immaterial to the company’s fiscal second-quarter results, it expected a severe hit for the rest of the fiscal and accordingly refrained from updating its fiscal 2020 guidance. Walgreens noted that although the situation is temporary, given so many rapidly-changing variables related to the pandemic, it is difficult to gauge the potential positive and negative impacts of the same.
The Pharmaceutical Wholesale division so far has been the most affected by the pandemic. The company has been working actively to support the ongoing healthcare crisis by providing medicines and advice to patients and ensuring seamless operations of the supply chain. Besides, the newly-formed joint venture with McKesson in Germany has already started to augment Walgreens Boots’ reach and scale in the significant German pharmaceutical wholesale market. This is anticipated to have significantly contributed to the company’s fiscal fourth-quarter performance.
For the fiscal fourth quarter, earlier the company projected U.S. script growth of around 3-3.5%, which remains below the 4.9% pre-COVID run rate.
In the fiscal fourth quarter, Walgreens also progressed well with its collaboration with LabCorp. The companies sought to open at least 600 LabCorp patient centers across the United States, thereby offering diagnostic lab testing services in the community. This process started in the fiscal third quarter. Accordingly, this might have contributed to the company’s top-line numbers in the to-be-reported quarter as well.
Also, the company entered into a multi-year Medicare agreement with UnitedHealthcare, which entails a new co-branded Medicare Advantage plan, with Walgreens being the exclusive Retail Pharmacy company. These should have registered sales growth during the fourth quarter.
However, over the past few quarters, Walgreens Boots has been hit by an FDA crackdown on its sale of tobacco and e-cigarettes, especially to teenagers. Additionally, Brexit has been posing a huge threat to Walgreens as sales at its Boots UK stores dropped due to deteriorating consumer scenario in the U.K. These downsides might have weighed on the company’s profit margins in the soon-to-be-reported quarter.
Earnings Whispers
Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESPhas good chances of beating estimates. But this is not the case here as you can see:
Earnings ESP: Walgreens Boots has an Earnings ESP of -3.76%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Walgreens Boots currently carries a Zacks Rank #5 (Strong Sell).
Stocks Worth a Look
Here are three medical stocks worth considering from the same space with the right mix of elements to surpass expectations this earnings season.
DaVita Inc. (DVA - Free Report) has an Earnings ESP of +2.88% and a Zacks Rank of 1, at present. The company is slated to release third-quarter 2020 numbers on Nov 3.
LHC Group has an Earnings ESP of +1.85% and a Zacks Rank of 2, at present. The company is slated to release third-quarter 2020 numbers on Nov 4.
Zacks’ 2020 Election Stock Report:
In addition to the companies you learned about above, we invite you to learn more about profiting from the upcoming presidential election. Trillions of dollars will shift into new market sectors after the votes are tallied, and investors could see significant gains. This report reveals specific stocks that could soar: 6 if Trump wins, 6 if Biden wins.
Image: Bigstock
Will Walgreens (WBA) Post Dull Retail Numbers in Q4 Earnings?
Walgreens Boots Alliance, Inc. (WBA - Free Report) is slated to release fourth-quarter fiscal 2020 results on Oct 15, before market open.
In the last reported quarter, the company reported a negative earnings surprise of 24.55%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on two occasions and missed in the other two, the average miss being 5.11%. Let’s take a look at how things have shaped up prior to this announcement.
Factors at Play
Through the fiscal fourth quarter (June to August 2020), shares of Walgreens declined consistently on the coronavirus-led economic crisis that has pushed traditional bricks-and-mortar retail stores into huge uncertainty. Although the fourth quarter witnessed the lifting of restrictions in many regions, the company is somewhat doubtful about any stark rebound in its business as certain aspects of customer behavior are likely to permanently change.
This might have continued to result in a sales drop for the company across its Retail Pharmacy USA division in the quarter to be reported.
Per the company’s earlier announcement, the U.S. retail comp sales growth projection for the fourth quarter was around 2-3%. However, it also apprehended about an adverse category mix that might have dampened the growth.
Walgreens Boots Alliance, Inc. Price and EPS Surprise
Walgreens Boots Alliance, Inc. price-eps-surprise | Walgreens Boots Alliance, Inc. Quote
The situation was graver for the company’s international businesses during these months with international trade mostly remaining at a standstill. In the last reported quarter, the company faced a significant decline in footfall across most of its markets in retail pharmacy international, especially in the U.K. With the resurgence of coronavirus cases in this region once again in the fiscal fourth quarter, sales in the company’s Retail Pharmacy International division are once again expected to have suffered heavily.
Per the company’s earlier announcement, the Boots UK retail comps were projected to decline around 40% in the fourth quarter, with retail gross margins to be down around 400-500 basis points. This projection was based on growing fulfillment costs reflecting a significant increase in online sales and home delivery. These assumptions might have led to an adverse COVID operating income impact of around $500-$575 million for the fourth quarter, with nearly 60% from the company’s international business.
In this regard, we note that though the pandemic-related impact was immaterial to the company’s fiscal second-quarter results, it expected a severe hit for the rest of the fiscal and accordingly refrained from updating its fiscal 2020 guidance. Walgreens noted that although the situation is temporary, given so many rapidly-changing variables related to the pandemic, it is difficult to gauge the potential positive and negative impacts of the same.
The Pharmaceutical Wholesale division so far has been the most affected by the pandemic. The company has been working actively to support the ongoing healthcare crisis by providing medicines and advice to patients and ensuring seamless operations of the supply chain. Besides, the newly-formed joint venture with McKesson in Germany has already started to augment Walgreens Boots’ reach and scale in the significant German pharmaceutical wholesale market. This is anticipated to have significantly contributed to the company’s fiscal fourth-quarter performance.
For the fiscal fourth quarter, earlier the company projected U.S. script growth of around 3-3.5%, which remains below the 4.9% pre-COVID run rate.
In the fiscal fourth quarter, Walgreens also progressed well with its collaboration with LabCorp. The companies sought to open at least 600 LabCorp patient centers across the United States, thereby offering diagnostic lab testing services in the community. This process started in the fiscal third quarter. Accordingly, this might have contributed to the company’s top-line numbers in the to-be-reported quarter as well.
Also, the company entered into a multi-year Medicare agreement with UnitedHealthcare, which entails a new co-branded Medicare Advantage plan, with Walgreens being the exclusive Retail Pharmacy company. These should have registered sales growth during the fourth quarter.
However, over the past few quarters, Walgreens Boots has been hit by an FDA crackdown on its sale of tobacco and e-cigarettes, especially to teenagers. Additionally, Brexit has been posing a huge threat to Walgreens as sales at its Boots UK stores dropped due to deteriorating consumer scenario in the U.K. These downsides might have weighed on the company’s profit margins in the soon-to-be-reported quarter.
Earnings Whispers
Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESPhas good chances of beating estimates. But this is not the case here as you can see:
Earnings ESP: Walgreens Boots has an Earnings ESP of -3.76%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Walgreens Boots currently carries a Zacks Rank #5 (Strong Sell).
Stocks Worth a Look
Here are three medical stocks worth considering from the same space with the right mix of elements to surpass expectations this earnings season.
Humana Inc. (HUM - Free Report) currently has a Zacks Rank #2 and an Earnings ESP of +3.35%. The company is scheduled to report third-quarter 2020 earnings on Nov 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita Inc. (DVA - Free Report) has an Earnings ESP of +2.88% and a Zacks Rank of 1, at present. The company is slated to release third-quarter 2020 numbers on Nov 3.
LHC Group has an Earnings ESP of +1.85% and a Zacks Rank of 2, at present. The company is slated to release third-quarter 2020 numbers on Nov 4.
Zacks’ 2020 Election Stock Report:
In addition to the companies you learned about above, we invite you to learn more about profiting from the upcoming presidential election. Trillions of dollars will shift into new market sectors after the votes are tallied, and investors could see significant gains. This report reveals specific stocks that could soar: 6 if Trump wins, 6 if Biden wins.
Check out the 2020 Election Stock Report >>