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Walgreens Boots (WBA) Q1 Earnings Top Estimates, Margins Down
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Walgreens Boots Alliance, Inc. (WBA - Free Report) delivered adjusted earnings per share (EPS) of 66 cents in first-quarter fiscal 2024, plunging 43.1% from the year-ago quarter’s figure (down 43.7% at constant exchange rate or CER). The figure topped the Zacks Consensus Estimate by 4.8%.
GAAP loss per share for first-quarter fiscal 2024 was 8 cents compared with the year-ago quarter’s loss of $4.31.
Total Sales
Walgreens Boots recorded total sales of $36.71 billion in the fiscal first quarter, up 9.9% year over year and 8.7% at CER. The top line also surpassed the Zacks Consensus Estimate by 5.1%.
Quarterly Details
The company currently operates its business into three reportable segments — U.S. Retail Pharmacy, International and U.S. Healthcare.
U.S. Retail Pharmacy
The segment’s sales totaled $28.9 billion in the fiscal first quarter, up 6.4% year over year.
Comparable sales increased 8.1% from the year-ago quarter’s levels.
Pharmacy sales were up 10.7% from the year-ago quarter’s figures and comparable pharmacy sales increased 13.1%, benefiting from higher branded drug inflation and strong execution in pharmacy services.
Retail sales fell 6.1% and comparable retail sales were down 5% year over year, reflecting macroeconomic-driven consumer pressure, a 160-basis point direct impact from a weaker flu and respiratory season, and Thanksgiving holiday store closures.
International
Revenues in the International division rose 12.4% on a year-over-year basis and increased 4.4% at CER to $5.80 billion in the fiscal first quarter.
Boots UK sales rose 6.2% year over year. In Germany, wholesale business sales increased 3.7% in the fiscal first quarter.
Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise
Boots UK’s comparable retail sales increased 0.8%. However, Boots UK’s comparable pharmacy sales rose 9.8% year over year.
U.S. Healthcare
U.S. Healthcare reported fiscal first-quarter revenues of $1.9 billion. The metric was up 12% on a pro-forma basis from the year-ago quarter’s, led by VillageMD and Shields.
Within the segment, the Shields business rose 27%, driven by recent contract wins and further expansion of existing partnerships.
VillageMD grew 14% on a pro forma basis, reflecting the same clinic growth, additional full-risk lives, and increased multi-specialty productivity.
Margins
Gross profit in the reported quarter fell 2.6% year over year to $6.77 billion. Gross margin contracted 239 bps to 18.4%.
Selling, general and administrative expenses fell 47.9% year over year to $6.85 billion.
The company reported an adjusted operating loss of $81 million for the quarter compared with $6.21 billion in the year-ago period.
Financial Condition
Walgreens Boots exited the first quarter of fiscal 2024 with cash and cash equivalents of $784 million compared with $728 billion recorded in fourth-quarter fiscal 2023. The total debt was $9.26 billion at the end of first-quarter fiscal 2024, up from $9.06 billion at fourth-quarter fiscal 2023.
Net cash used by operating activities at the end of first-quarter fiscal 2024 was $281 million compared with the year-ago period’s cash inflow of $493 million.
Adjusted EPS guidance is expected in the $3.20-$3.50 range. The current Zacks Consensus Estimate is pegged at $3.34.
Our Take
Walgreens Boots exited first-quarter fiscal 2024 with better-than-expected earnings and revenues. The company’s U.S. Healthcare business grew, led by key contract wins and continued partnership growth. During the reported quarter, VillageMD registered strong growth, reflecting existing clinic growth, additional full-risk lives and increased multi-specialty productivity.
However, operating cash flow was affected by an anticipated inventory build for the United States and U.K. holiday seasons and the timing of payor reimbursement. Escalating costs and contraction of gross margin are a concern.
Zacks Rank & Key Picks
Walgreens Boots currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that are supposed to report earnings soon are DaVita Inc. (DVA - Free Report) , Biodesix (BDSX - Free Report) and Integer Holdings Corporation (ITGR - Free Report) .
DaVita, sporting a Zacks Rank #1 (Strong Buy), has an estimated long-term growth rate of 17.3%. DVA’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 36.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s shares have gained 38.2% compared with the industry’s 9.4% rise in the past year. DVA is expected to report earnings on Feb 28.
Biodesix, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 32.3% for 2024. BDSX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an average surprise of 9.76%.
Biodesix’s shares have lost 13.2% in the past year compared with the industry’s 3.2% decline. BDSX is expected to report its earnings on Mar 4.
Integer Holdings, sporting a Zacks Rank of 2 at present, has an estimated long-term growth rate of 15.8%. ITGR’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 11.9%.
Integer Holdings’ shares have rallied 43.5% in the past year against the industry’s 3.7% decline. ITGR is expected to report its earnings on Feb 15.
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Walgreens Boots (WBA) Q1 Earnings Top Estimates, Margins Down
Walgreens Boots Alliance, Inc. (WBA - Free Report) delivered adjusted earnings per share (EPS) of 66 cents in first-quarter fiscal 2024, plunging 43.1% from the year-ago quarter’s figure (down 43.7% at constant exchange rate or CER). The figure topped the Zacks Consensus Estimate by 4.8%.
GAAP loss per share for first-quarter fiscal 2024 was 8 cents compared with the year-ago quarter’s loss of $4.31.
Total Sales
Walgreens Boots recorded total sales of $36.71 billion in the fiscal first quarter, up 9.9% year over year and 8.7% at CER. The top line also surpassed the Zacks Consensus Estimate by 5.1%.
Quarterly Details
The company currently operates its business into three reportable segments — U.S. Retail Pharmacy, International and U.S. Healthcare.
U.S. Retail Pharmacy
The segment’s sales totaled $28.9 billion in the fiscal first quarter, up 6.4% year over year.
Comparable sales increased 8.1% from the year-ago quarter’s levels.
Pharmacy sales were up 10.7% from the year-ago quarter’s figures and comparable pharmacy sales increased 13.1%, benefiting from higher branded drug inflation and strong execution in pharmacy services.
Retail sales fell 6.1% and comparable retail sales were down 5% year over year, reflecting macroeconomic-driven consumer pressure, a 160-basis point direct impact from a weaker flu and respiratory season, and Thanksgiving holiday store closures.
International
Revenues in the International division rose 12.4% on a year-over-year basis and increased 4.4% at CER to $5.80 billion in the fiscal first quarter.
Boots UK sales rose 6.2% year over year. In Germany, wholesale business sales increased 3.7% in the fiscal first quarter.
Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise
Walgreens Boots Alliance, Inc. price-consensus-eps-surprise-chart | Walgreens Boots Alliance, Inc. Quote
Boots UK’s comparable retail sales increased 0.8%. However, Boots UK’s comparable pharmacy sales rose 9.8% year over year.
U.S. Healthcare
U.S. Healthcare reported fiscal first-quarter revenues of $1.9 billion. The metric was up 12% on a pro-forma basis from the year-ago quarter’s, led by VillageMD and Shields.
Within the segment, the Shields business rose 27%, driven by recent contract wins and further expansion of existing partnerships.
VillageMD grew 14% on a pro forma basis, reflecting the same clinic growth, additional full-risk lives, and increased multi-specialty productivity.
Margins
Gross profit in the reported quarter fell 2.6% year over year to $6.77 billion. Gross margin contracted 239 bps to 18.4%.
Selling, general and administrative expenses fell 47.9% year over year to $6.85 billion.
The company reported an adjusted operating loss of $81 million for the quarter compared with $6.21 billion in the year-ago period.
Financial Condition
Walgreens Boots exited the first quarter of fiscal 2024 with cash and cash equivalents of $784 million compared with $728 billion recorded in fourth-quarter fiscal 2023. The total debt was $9.26 billion at the end of first-quarter fiscal 2024, up from $9.06 billion at fourth-quarter fiscal 2023.
Net cash used by operating activities at the end of first-quarter fiscal 2024 was $281 million compared with the year-ago period’s cash inflow of $493 million.
The company has a five-year annualized dividend growth rate of 1.96%.
Fiscal 2024 Guidance
The company restated its 2024 EPS guidance.
Adjusted EPS guidance is expected in the $3.20-$3.50 range. The current Zacks Consensus Estimate is pegged at $3.34.
Our Take
Walgreens Boots exited first-quarter fiscal 2024 with better-than-expected earnings and revenues. The company’s U.S. Healthcare business grew, led by key contract wins and continued partnership growth. During the reported quarter, VillageMD registered strong growth, reflecting existing clinic growth, additional full-risk lives and increased multi-specialty productivity.
However, operating cash flow was affected by an anticipated inventory build for the United States and U.K. holiday seasons and the timing of payor reimbursement. Escalating costs and contraction of gross margin are a concern.
Zacks Rank & Key Picks
Walgreens Boots currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that are supposed to report earnings soon are DaVita Inc. (DVA - Free Report) , Biodesix (BDSX - Free Report) and Integer Holdings Corporation (ITGR - Free Report) .
DaVita, sporting a Zacks Rank #1 (Strong Buy), has an estimated long-term growth rate of 17.3%. DVA’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 36.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s shares have gained 38.2% compared with the industry’s 9.4% rise in the past year. DVA is expected to report earnings on Feb 28.
Biodesix, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 32.3% for 2024. BDSX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an average surprise of 9.76%.
Biodesix’s shares have lost 13.2% in the past year compared with the industry’s 3.2% decline. BDSX is expected to report its earnings on Mar 4.
Integer Holdings, sporting a Zacks Rank of 2 at present, has an estimated long-term growth rate of 15.8%. ITGR’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 11.9%.
Integer Holdings’ shares have rallied 43.5% in the past year against the industry’s 3.7% decline. ITGR is expected to report its earnings on Feb 15.