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Walgreens Boots (WBA) Q2 Earnings Top Estimates, Margins Up

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Walgreens Boots Alliance, Inc. (WBA - Free Report) reported adjusted earnings per share (EPS) from continuing operations of $1.59 for second-quarter fiscal 2022, increasing 26.2% from the year-ago figure (up 26.5% at constant exchange rate or CER). The figure also surpassed the Zacks Consensus Estimate by 14.4%.

GAAP EPS from continuing operations for second-quarter fiscal 2022 was $1.02 compared with the year-ago $1.06, representing a drop of 3.4%.

Total Sales

Walgreens Boots recorded total sales of $33.76 billion for the fiscal second quarter, up 2.9% year over year and 3.8% at CER. The top line also surpassed the Zacks Consensus Estimate by 0.2%.

Quarterly Details

Following Walgreens Boots’ announcement regarding the sale of the majority of its Alliance Healthcare businesses and a portion of the Retail Pharmacy International segment's businesses in Europe to AmerisourceBergen, the company reorganized the remaining businesses into two reportable operating segments — United States and International.

United States

The segment’s sales totaled $27.70 billion for the fiscal second quarter, highlighting an improvement of 1.2% year over year.

Comparable sales for the quarter increased 9.5% from the year-ago quarter, reflecting a 7.3% uptick in comparable pharmacy sales and a 14.7% rise in comparable retail sales.

In comparable stores, prescriptions filled increased 4.7% from the year-ago quarter, including a positive impact of nearly 275 basis points (bps) from COVID-19 vaccinations.

Pharmacy sales were down 3.3% from the year-ago quarter, negatively impacted by a 910-bp headwind from the AllianceRx Walgreens business.

Retail sales increased 14.5% and comparable retail sales grew 14.7% year over year. Comparable retail sales (excluding tobacco and e-cigarettes) also increased 15.7% from the prior-year quarter.

Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise

Health and wellness sales increased 43.3%, backed by at-home COVID-19 tests and cough cold flu.

Personal care and beauty increased 9.7% and 6.5%, respectively.


Revenues at the International division rose 2.6% on a year-over-year basis to $5.60 billion for the fiscal second quarter. Sales were up 7.5% at CER, reflecting the ongoing recovery in the U.K. market despite the trading headwind created by the Omicron variant.

Boots UK sales rose 15.2% and the Germany wholesale business sales were up 2.5% in the fiscal second quarter.

Boots UK’s comparable retail sales increased 22%, driven by market share gains across all categories, led by beauty.


Gross profit for the reported quarter increased 13.7% year over year to $7.71 billion. Gross margin expanded 215 bps to 22.8%.

Selling, general and administrative expenses were up 8.9% year over year to $6.57 billion.

Adjusted operating profit for the quarter was $1.14 billion, reflecting a 52.1% surge from the year-ago period. Operating margin was 3.4% for the reported quarter, reflecting a 109-bp expansion year over year.

Financial Condition

Walgreens Boots exited the second quarter of fiscal 2022 with cash and cash equivalents of $1.89 billion compared with $1.19 billion recorded at the fiscal first-quarter end. Total debt was $13.31 billion at the fiscal second-quarter end, up from $8.98 billion at the first-quarter fiscal 2021 end.

Net cash provided by operating activities at the end of second-quarter fiscal 2022 was $2.18 billion, down from the year-ago period’s $2.56 billion.

The company has a 5-year annualized dividend growth rate of 5.18%.

Fiscal 2022 Guidance

The company has reinstated the full-year adjusted EPS guidance to low-single-digit growth. The Zacks Consensus Estimate for the same is pegged at $5.03.

Our Take  

Walgreens Boots exited second-quarter fiscal 2022 with better-than-expected earnings and revenues. Impressive performance by both the operating segments buoys optimism. Robust sales of instill investor confidence. The strong execution across business segments, led by COVID-19 vaccinations and testing, is encouraging. The company witnessed continued momentum online in the second quarter, with digital sales up 38% in the United States. The rollout of VillageMD continues with 94 co-located clinics opened at the end of the second quarter, up from 81 clinics at the end of the first quarter, which is impressive.  During the fiscal second quarter, Walgreensadministered more than 11.8 million COVID-19 vaccinations and 6.6 million COVID-19 tests. The continued acceleration of Walgreens omnichannel offerings and a significant rise in MyWalgreens membership are notable upsides during the quarter. During the quarter, the company launched the Walgreens COVID-19 Index to advance rapid detection of the Omicron variant and to track variant activity by state, which is another upside. Expansion of both margins looks encouraging as well.

However, strong growth in operating income was offset by the working capital impact of a decline in the AllianceRx Walgreens business, the year-over-year impact of COVID-19-related government support and increased capital expenditures. Moreover, Pharmacy sales were also negatively impacted from decline in AllianceRx business.

Zacks Rank and Key Picks

Walgreens currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Avrobio, Inc. (AVRO - Free Report) currently has an Earnings ESP of +0.70% and sports a Zacks Rank #2 (Buy).

For 2023, Avrobio’s earnings growth rate is estimated at 10.9%.

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For 2023, ALGS earnings growth rate is estimated at 31.3%.

Immunocore Holdings plc (IMCR - Free Report) currently has an Earnings ESP of +4.37%. Immunocore Holdings carries a Zacks Rank #2.

For 2023, IMCR’s earnings growth rate is estimated at 9.1%.