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Walgreens (WBA) Stock Sinks 1.7% Ahead of Q4 Earnings: What to Watch

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Shares of Walgreens Boots Alliance (WBA - Free Report) slipped 1.7% during regular trading hours Wednesday in a sign that investors might be a tad bit nervous about the pharmacy and cosmetic giant’s Q4 earnings results Thursday.

Overview

Walgreens is coming off a solid third quarter that has propelled its stock price up over 14% in the last three months. The company has also announced a ton of partnerships that should help it better compete in the shifting retail environment against the likes of Amazon (AMZN - Free Report) , Target (TGT - Free Report) , CVS (CVS - Free Report) , and others.

WBA recently partnered with and took a minority stake in the subscription-based beauty firm Birchbox in order to offer more high-end cosmetics and attract millennial customers. Walgreens also announced a collaboration with Kroger (KR - Free Report) that will see it sell various grocery offerings as part of a pilot program. Plus, WBA launched a store on Alibaba’s (BABA - Free Report) Tmall platform not too long ago.

 

Outlook

Walgreens’ Q4 revenues are projected to jump by 11.6% to hit $33.64 billion, based on our current Zacks Consensus Estimate. Meanwhile, Walgreens is projected to see its adjusted quarterly earnings pop by 9.9% to reach $1.44 per share. However, we still need to know how likely it is that WBA is able to top our quarterly earnings estimates Thursday.

Luckily, we can turn to our exclusive Earnings ESP figure to help us. The Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

Walgreens currently sports an earnings ESP of +1.60% and a Zacks Rank #3 (Hold). Therefore, investors can consider WBA a firm that could beat our Q4 earnings estimate. The company has also topped or matched our quarterly earnings estimates for roughly four years.

Walgreens Boots Alliance is set to report its Q4 financial results before the market opens on Thursday, October 11.

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