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Walgreens Boots (WBA) Q2 Earnings Top Estimates, Margins Down
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Walgreens Boots Alliance, Inc. (WBA - Free Report) reported adjusted earnings per share (EPS) of $1.52 for second-quarter fiscal 2020, down 7.3% year over year (same at constant exchange rate or CER). Also, the reported figure exceeded the Zacks Consensus Estimate by 4.8%.
Reported EPS of $1.07 declined 13.7% on a year-over-year basis.
Sluggishness in Retail Pharmacy International and margin contraction strained the bottom line. The company noted that the impact of the coronavirus pandemic started to reflect at the end of the fiscal second quarter. Hence, its impact was immaterial to overall result.
Total Sales
Walgreens Boots recorded total sales of $35.82 billion in the fiscal second quarter, up 3.7% year over year, and 4.1% at constant exchange rate or CER. The top-line figure exceeded the Zacks Consensus by 1.5%. This year-over-year growth was led by improvement within the Retail Pharmacy USA and Pharmaceutical Wholesale divisions, partially offset by a dull performance by Retail Pharmacy International.
Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise
Walgreens Boots reports through three segments — Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale.
Retail Pharmacy USA
The segment’s sales totaled $27.2 billion in the fiscal second quarter, highlighting an improvement of 3.8% year over year. Pharmacy sales were up 5.3% from the year-ago quarter on higher brand inflation, prescription volume and growth in central specialty. Pharmacy sales at comparable stores improved 3.7% year over year, while prescriptions filled in comparable stores (adjusted to 30-day equivalents) rose 4.9% in the quarter. Retail sales edged down 0.3%, while comparable retail sales inched up 0.6%, year on year. Excluding tobacco and e-cigarettes, comparable retail sales increased 1.9%.
Retail Pharmacy International
Revenues at the Retail Pharmacy International division declined 0.8% on a year-over-year basis to $3.1 billion in the fiscal second quarter. Sales were down 1.7% at CER due to lower Boots U.K. sales and soft sales in Chile and Thailand.
Boots UK’s comparable pharmacy sales were up 1.8% at CER, while comparable retail sales slid 4.6% at CER in the reported quarter.
Pharmaceutical Wholesale
The Pharmaceutical Wholesale division’s quarterly sales were $6.1 billion, up 5.7% year over year (up 8% at CER on growth in emerging markets and the U.K.).
Margins
Gross profit in the reported quarter fell 3.1% year over year to $7.51 billion. Gross margin contracted 149 basis points (bps) to 20.9%.
Selling, general and administrative (SG&A) expenses were down 0.2% year over year to $6.3 billion. Operating income deteriorated 16% to $1.2 billion. Overall, operating margin shrunk 79 bps to 3.4%.
Financial Condition
Walgreens Boots exited the fiscal second quarter with cash and cash equivalents of $792 million compared with the $811 million recorded at the end of the fiscal first quarter. Long-term debt was $10.63 billion at the end of the reported quarter, unchanged from the last quarter’s figure. Year to date, net cash provided by operating activities was $2.4 billion, up from the year-ago period’s $1.2 billion.
Fiscal 2020 Guidance Update
Walgreens Boots noted that prior to the COVID-19 outbreak, the company was on track to maintain its fiscal 2020 guidance (roughly flat growth in fiscal 2020 adjusted EPS, on a constant currency basis, with a range of plus or minus 3%). As it is unclear about the future impact of the pandemic, the company will update the full-year guidance during its next earnings conference call.
Meanwhile, the Zacks Consensus Estimate for fiscal 2020 adjusted earnings per share is currently pegged at $5.85.
Our Take
Walgreens Boots exited second-quarter fiscal 2020 with better-than-expected numbers. However, year-over-year decline in adjusted earnings is a cause of concern.
Meanwhile, choppy market conditions, particularly in retail, have been inducing sluggishness in the Retail Pharmacy International division. Margin pressure is a major overhang on the stock. Overall, the Retail Pharmacy USA division witnessed an uptick in sales during the quarter on account of comparable prescription growth and a strong retail prescription market. Also, a rise in Pharmaceutical Wholesale division sales buoys optimism.
While the coronavirus impact was immaterial to the company’s fiscal second-quarter result, it is highly concerned about the overall impact on its full fiscal year performance and has accordingly not updated the guidance, as of now. Walgreens Boots noted that although the situation is temporary, given so many rapidly-changing variables related to the pandemic, it is currently difficult to gauge the potential positive and negative effects of the pandemic.
Meanwhile, among many of its COVID-19-related initiatives, the company is currently partnering with the U.S. and the UK governments to initiate testing.
Zacks Rank and Key Picks
Walgreens Boots currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks, which reported solid results this earnings season, are STERIS plc (STE - Free Report) , ResMed Inc. (RMD - Free Report) and Penumbra, Inc. (PEN - Free Report) .
STERIS reported third-quarter fiscal 2020 adjusted EPS of $1.45, outpacing the Zacks Consensus Estimate by 1.4%. Its net revenues of $774.3 million outpaced the consensus estimate by 3.3%. The company sports a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
ResMed currently carries a Zacks Rank #2 (Buy). It reported second-quarter fiscal 2020 adjusted EPS of $1.21, surpassing the Zacks Consensus Estimate by 19.8%. Its revenues of $736.2 million outpaced the consensus mark by 1.5%.
Penumbra delivered fourth-quarter 2019 EPS of 22 cents, beating the Zacks Consensus Estimate by 22.2%. Its quarterly revenues of $145.3 million surpassed the consensus estimate by 2.6%. The company currently flaunts a Zacks Rank #1.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Walgreens Boots (WBA) Q2 Earnings Top Estimates, Margins Down
Walgreens Boots Alliance, Inc. (WBA - Free Report) reported adjusted earnings per share (EPS) of $1.52 for second-quarter fiscal 2020, down 7.3% year over year (same at constant exchange rate or CER). Also, the reported figure exceeded the Zacks Consensus Estimate by 4.8%.
Reported EPS of $1.07 declined 13.7% on a year-over-year basis.
Sluggishness in Retail Pharmacy International and margin contraction strained the bottom line. The company noted that the impact of the coronavirus pandemic started to reflect at the end of the fiscal second quarter. Hence, its impact was immaterial to overall result.
Total Sales
Walgreens Boots recorded total sales of $35.82 billion in the fiscal second quarter, up 3.7% year over year, and 4.1% at constant exchange rate or CER. The top-line figure exceeded the Zacks Consensus by 1.5%. This year-over-year growth was led by improvement within the Retail Pharmacy USA and Pharmaceutical Wholesale divisions, partially offset by a dull performance by Retail Pharmacy International.
Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise
Walgreens Boots Alliance, Inc. price-consensus-eps-surprise-chart | Walgreens Boots Alliance, Inc. Quote
Segments in Detail
Walgreens Boots reports through three segments — Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale.
Retail Pharmacy USA
The segment’s sales totaled $27.2 billion in the fiscal second quarter, highlighting an improvement of 3.8% year over year. Pharmacy sales were up 5.3% from the year-ago quarter on higher brand inflation, prescription volume and growth in central specialty. Pharmacy sales at comparable stores improved 3.7% year over year, while prescriptions filled in comparable stores (adjusted to 30-day equivalents) rose 4.9% in the quarter. Retail sales edged down 0.3%, while comparable retail sales inched up 0.6%, year on year. Excluding tobacco and e-cigarettes, comparable retail sales increased 1.9%.
Retail Pharmacy International
Revenues at the Retail Pharmacy International division declined 0.8% on a year-over-year basis to $3.1 billion in the fiscal second quarter. Sales were down 1.7% at CER due to lower Boots U.K. sales and soft sales in Chile and Thailand.
Boots UK’s comparable pharmacy sales were up 1.8% at CER, while comparable retail sales slid 4.6% at CER in the reported quarter.
Pharmaceutical Wholesale
The Pharmaceutical Wholesale division’s quarterly sales were $6.1 billion, up 5.7% year over year (up 8% at CER on growth in emerging markets and the U.K.).
Margins
Gross profit in the reported quarter fell 3.1% year over year to $7.51 billion. Gross margin contracted 149 basis points (bps) to 20.9%.
Selling, general and administrative (SG&A) expenses were down 0.2% year over year to $6.3 billion. Operating income deteriorated 16% to $1.2 billion. Overall, operating margin shrunk 79 bps to 3.4%.
Financial Condition
Walgreens Boots exited the fiscal second quarter with cash and cash equivalents of $792 million compared with the $811 million recorded at the end of the fiscal first quarter. Long-term debt was $10.63 billion at the end of the reported quarter, unchanged from the last quarter’s figure. Year to date, net cash provided by operating activities was $2.4 billion, up from the year-ago period’s $1.2 billion.
Fiscal 2020 Guidance Update
Walgreens Boots noted that prior to the COVID-19 outbreak, the company was on track to maintain its fiscal 2020 guidance (roughly flat growth in fiscal 2020 adjusted EPS, on a constant currency basis, with a range of plus or minus 3%). As it is unclear about the future impact of the pandemic, the company will update the full-year guidance during its next earnings conference call.
Meanwhile, the Zacks Consensus Estimate for fiscal 2020 adjusted earnings per share is currently pegged at $5.85.
Our Take
Walgreens Boots exited second-quarter fiscal 2020 with better-than-expected numbers. However, year-over-year decline in adjusted earnings is a cause of concern.
Meanwhile, choppy market conditions, particularly in retail, have been inducing sluggishness in the Retail Pharmacy International division. Margin pressure is a major overhang on the stock. Overall, the Retail Pharmacy USA division witnessed an uptick in sales during the quarter on account of comparable prescription growth and a strong retail prescription market. Also, a rise in Pharmaceutical Wholesale division sales buoys optimism.
While the coronavirus impact was immaterial to the company’s fiscal second-quarter result, it is highly concerned about the overall impact on its full fiscal year performance and has accordingly not updated the guidance, as of now. Walgreens Boots noted that although the situation is temporary, given so many rapidly-changing variables related to the pandemic, it is currently difficult to gauge the potential positive and negative effects of the pandemic.
Meanwhile, among many of its COVID-19-related initiatives, the company is currently partnering with the U.S. and the UK governments to initiate testing.
Zacks Rank and Key Picks
Walgreens Boots currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks, which reported solid results this earnings season, are STERIS plc (STE - Free Report) , ResMed Inc. (RMD - Free Report) and Penumbra, Inc. (PEN - Free Report) .
STERIS reported third-quarter fiscal 2020 adjusted EPS of $1.45, outpacing the Zacks Consensus Estimate by 1.4%. Its net revenues of $774.3 million outpaced the consensus estimate by 3.3%. The company sports a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
ResMed currently carries a Zacks Rank #2 (Buy). It reported second-quarter fiscal 2020 adjusted EPS of $1.21, surpassing the Zacks Consensus Estimate by 19.8%. Its revenues of $736.2 million outpaced the consensus mark by 1.5%.
Penumbra delivered fourth-quarter 2019 EPS of 22 cents, beating the Zacks Consensus Estimate by 22.2%. Its quarterly revenues of $145.3 million surpassed the consensus estimate by 2.6%. The company currently flaunts a Zacks Rank #1.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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