- 10 ноября 2018, 17:30
- Zacks Investment Research
It has been about a month since the last earnings report for Walgreens Boots Alliance (WBA). Shares have added about 16.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Walgreens due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Walgreens Boots Beats on Q4 Earnings, Operating Margin Declines
Walgreens Bootsreported adjusted earnings per share (EPS) of $1.48 for fourth-quarter fiscal 2018, up 12.9% year over year (same at constant exchange rate). The figure surpassed the Zacks Consensus Estimate of $1.44.
On a reported basis, net earnings came in at $1.5 billion, reflecting an 88.5% surge from the prior-year quarter. Reported EPS came in at $1.55, up 103% on a year-over-year basis.
Full-year adjusted EPS was $6.02, reflecting an 18% rise from the year-ago period. The figure also surpassed the Zacks Consensus Estimate of $5.98 per share.
Walgreens Boots recorded total sales of $33.44 billion in the fiscal fourth quarter, up 10.9% year over year and 11.3% at constant exchange rate or CER. However, the top line missed the Zacks Consensus Estimate of $33.64 billion.
For the full year, the company reported revenues of $131.53 billion, an 11.3% improvement from the year-ago period. However, the reported figure lagged the Zacks Consensus Estimate of $131.60 billion.
Segments in Detail
Walgreens Boots reports under three operating segments: Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale.
Retail Pharmacy USA
The segment recorded sales of $25.5 billion in the fourth quarter, highlighting an improvement of 14.4% year over year. Within this segment, total sales at comparable stores edged up 0.3%, while prescriptions filled in comparable stores increased 1.3% year over year. With the addition of Rite Aid stores, retail sales increased 8.3% year over year. However, comparable retail sales dropped 1.9%.
Pharmacy sales, which accounted for 73.6% of the Retail Pharmacy USA division’s sales in the quarter, increased 16.7% from the year-ago quarter on higher prescription volume from the acquisition of Rite Aid stores and central specialty. Pharmacy sales at comparable stores improved 1.3% year over year on higher volume.
Retail Pharmacy International
Revenues at the Retail Pharmacy International division dropped 1.9% on a year-over-year basis (down 2.7% at CER) to $2.9 billion in the fourth quarter. At CER, comparable pharmacy sales declined 3.4% year over year and comparable retail sales dipped 0.9%.
The Pharmaceutical Wholesale division recorded quarterly sales of $5.6 billion, up 2.3% year over year (up 4.7% at CER).
Gross profit in the reported quarter increased 3.2% year over year to $7.58 billion. However, gross margin contracted 169 basis points (bps) to 22.6%.
Selling, general and administrative (SG&A) expenses dropped 1.7% year over year to $6.1 billion. Operating income (including Equity earnings in AmerisourceBergen) increased 30.3% to $1.46 billion. Overall, operating margin expanded 65 bps to 4.4%.
Walgreens Boots exited the fiscal with cash and cash equivalents of $785 million, compared with $1.82 billion at the end of the third quarter. Long-term debt was $12.43 billion, compared with $12.45 billion at the end of the third quarter.
In fiscal 2018, the company generated operating cash flow of $8.27 billion compared with $7.25 billion a year ago. Resultant free cash flow was $6.9 billion, an increase of $1.0 billion from fiscal 2017.
Walgreens Boots provided outlook for fiscal 2019. The company projects adjusted EPS in the range of $6.40 to $6.70 (a 7% to 12% growth at CER). The Zacks Consensus Estimate of $6.44 per share is within the guided range.
The guidance assumes continued execution of the company’s earlier-announced $10 billion share repurchase program, including the expected repurchase of approximately $3 billion worth of shares in fiscal 2019.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months.
Currently, Walgreens has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Walgreens has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Walgreens Boots Alliance, Inc. (WBA): Free Stock Analysis Report
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