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Walgreens Boots Alliance, Inc. (WBA - Free Report) has been reeling under the effects of persistent reimbursement pressure and a competitive market. The stock carries a Zacks Rank #4 (Sell).
Year to date, Walgreens Boots has underperformed the industry. The stock has gained 12.3% compared with the industry’s 27.1% rise. A shift in the mix of pharmacy prescription volume toward programs offering lower reimbursement rates might affect Walgreens Boots’ results of operations. The company’s 90-day retail offering for patients with chronic prescription needs typically is at a lower margin than comparable 30-day prescriptions.
In the last few years, a slowdown in generic introduction has been affecting Walgreens Boots’ margins. In addition, of late, increased reimbursement pressure and generic drug cost inflation have been hampering Walgreens Boots' margin significantly.
A weak solvency scenario and moderately leveraged balance sheet are added headwinds. Walgreens Boots exited fiscal 2021 with cash and cash equivalents of $1.19 billion compared with $1.35 billion recorded at the end of the third quarter of fiscal 2021. Meanwhile, the company’s high level of debt on the balance sheet is a cause of worry, especially when the coronavirus mayhem has forced the corporate sector to halt production and supply.
Total debt was $8.98 billion at the end of fiscal 2021. Further, the current-year payable debt was $1.30 billion (the current debt level was $7.96 billion at the end of the third quarter of fiscal 2021), much more than the short-term cash level.
On a positive note, Walgreens Boots exited fourth-quarter fiscal 2021 with better-than-expected earnings and revenues. The robust sales of Boots.com instill investor confidence. To date, Walgreens Boots has administered more than 40 million COVID-19 vaccinations and 16 million COVID-19 tests.
The continued acceleration of Walgreens’ omnichannel offerings and a rise in MyWalgreens memberships were notable upsides during the quarter. Faster retail pick-up-related development in the United States, acceleration of its investment in VillageMD and increasing rollout of Village Medical at Walgreens Boots' full-service primary care clinics, look encouraging. Expansions of both margins are also encouraging.
The intensifying competition in the U.S. retail drugstore market has compelled Walgreens Boots to diversify its product offerings. In September 2021, Walgreens Boots, through its wholly-owned subsidiary, Walgreen Co., completed the majority investment in Shields -- an industry leader in integrated, health system-owned specialty pharmacy care. This investment signifies another step Walgreens Boots is taking to boost innovative healthcare models for future growth, providing a platform to further develop health system partnerships and coordinate care for those with complex, chronic conditions.
Zacks Rank and Key Picks
A few better-ranked stocks in the broader medical space are Varex Imaging Corporation (VREX - Free Report) , Omnicell, Inc. (OMCL - Free Report) and NextGen Healthcare, Inc. .
Varex, carrying a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 5%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 115.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Varex has outperformed the industry it belongs to in the past year. VREX has gained 75.6% versus the industry’s 5% fall.
Omnicell, carrying a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 16%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 17.4%, on average.
Omnicell has outperformed its industry over the past year. OMCL has gained 63.7% against the 38.5% industry decline.
NextGen, carrying a Zacks Rank #2, has a long-term earnings growth rate of 8.5%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 16%.
NextGen has outperformed its industry over the past year. NXGN has declined 12.3% compared with the industry’s 38.5% fall.
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Walgreens Boots (WBA) Faces Margin Pressure, Solvency Issue
Walgreens Boots Alliance, Inc. (WBA - Free Report) has been reeling under the effects of persistent reimbursement pressure and a competitive market. The stock carries a Zacks Rank #4 (Sell).
Year to date, Walgreens Boots has underperformed the industry. The stock has gained 12.3% compared with the industry’s 27.1% rise. A shift in the mix of pharmacy prescription volume toward programs offering lower reimbursement rates might affect Walgreens Boots’ results of operations. The company’s 90-day retail offering for patients with chronic prescription needs typically is at a lower margin than comparable 30-day prescriptions.
In the last few years, a slowdown in generic introduction has been affecting Walgreens Boots’ margins. In addition, of late, increased reimbursement pressure and generic drug cost inflation have been hampering Walgreens Boots' margin significantly.
A weak solvency scenario and moderately leveraged balance sheet are added headwinds. Walgreens Boots exited fiscal 2021 with cash and cash equivalents of $1.19 billion compared with $1.35 billion recorded at the end of the third quarter of fiscal 2021. Meanwhile, the company’s high level of debt on the balance sheet is a cause of worry, especially when the coronavirus mayhem has forced the corporate sector to halt production and supply.
Walgreens Boots Alliance, Inc. Price
Walgreens Boots Alliance, Inc. price | Walgreens Boots Alliance, Inc. Quote
Total debt was $8.98 billion at the end of fiscal 2021. Further, the current-year payable debt was $1.30 billion (the current debt level was $7.96 billion at the end of the third quarter of fiscal 2021), much more than the short-term cash level.
On a positive note, Walgreens Boots exited fourth-quarter fiscal 2021 with better-than-expected earnings and revenues. The robust sales of Boots.com instill investor confidence. To date, Walgreens Boots has administered more than 40 million COVID-19 vaccinations and 16 million COVID-19 tests.
The continued acceleration of Walgreens’ omnichannel offerings and a rise in MyWalgreens memberships were notable upsides during the quarter. Faster retail pick-up-related development in the United States, acceleration of its investment in VillageMD and increasing rollout of Village Medical at Walgreens Boots' full-service primary care clinics, look encouraging. Expansions of both margins are also encouraging.
The intensifying competition in the U.S. retail drugstore market has compelled Walgreens Boots to diversify its product offerings. In September 2021, Walgreens Boots, through its wholly-owned subsidiary, Walgreen Co., completed the majority investment in Shields -- an industry leader in integrated, health system-owned specialty pharmacy care. This investment signifies another step Walgreens Boots is taking to boost innovative healthcare models for future growth, providing a platform to further develop health system partnerships and coordinate care for those with complex, chronic conditions.
Zacks Rank and Key Picks
A few better-ranked stocks in the broader medical space are Varex Imaging Corporation (VREX - Free Report) , Omnicell, Inc. (OMCL - Free Report) and NextGen Healthcare, Inc. .
Varex, carrying a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 5%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 115.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Varex has outperformed the industry it belongs to in the past year. VREX has gained 75.6% versus the industry’s 5% fall.
Omnicell, carrying a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 16%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 17.4%, on average.
Omnicell has outperformed its industry over the past year. OMCL has gained 63.7% against the 38.5% industry decline.
NextGen, carrying a Zacks Rank #2, has a long-term earnings growth rate of 8.5%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 16%.
NextGen has outperformed its industry over the past year. NXGN has declined 12.3% compared with the industry’s 38.5% fall.