Walgreens Earnings Cheat Sheet: Higher Expenses Shrinks Margins, Profit Declines

Wall St. Cheat Sheet

S&P 500 component Walgreens reported its results for the first quarter. Walgreen operates a chain of retail drug stores.

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Walgreens Earnings Cheat Sheet for the First Quarter

Results: Net income for the drug store fell to $554 million (63 cents per share) vs. $580 million (62 cents per share) a year earlier. This is a decline of 4.5% from the year earlier quarter.

Revenue: Rose 4.7% to $18.16 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: WAG fell short of the mean analyst estimate of 67 cents per share. Analysts were expecting revenue of $18.21 billion.

Quoting Management: Walgreens President and CEO Greg Wasson said, “The first quarter was expected to be a very challenging one for gross profit dollar growth as we faced comparisons with strong gross profit performances in the first quarter of the two previous years. Despite that, we’re pleased with important aspects of our business including our record sales of $18.2 billion, the first-quarter record number of prescriptions filled, the continued profitable growth of our front-end business and delivering on our commitment to return cash to our shareholders.”

Key Stats:

Last quarter’s profit decrease breaks a streak of four consecutive quarters of year-over-year profit increases. In the fourth quarter of the last fiscal year, net income rose 68.5% from the year earlier, while the figure increased 30.2% in the third quarter of the last fiscal year, 10.5% in the second quarter of the last fiscal year and 18.6% in the first quarter of the last fiscal year.

Gross margin shrank 0.4 percentage point to 28.1%. The contraction appeared to be driven by increased costs, which rose 5.3% from the year earlier quarter while revenue rose 4.7%.

Revenue has risen the past four quarters. Revenue increased 6.5% to $17.97 billion in the fourth quarter of the last fiscal year. The figure rose 6.8% in the third quarter of the last fiscal year from the year earlier and climbed 8.9% in the second quarter of the last fiscal year from the year-ago quarter.

The company fell short of forecasts after beating estimates in the previous two quarters. In the fourth quarter of the last fiscal year, it topped the mark by 2 cents, and in the third quarter of the last fiscal year, it was ahead by 3 cents.

Looking Forward: Over the past ninety days, the average estimate for the second quarter has fallen from 94 cents per share to 86 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. At $2.82 per share, the average estimate for the fiscal year has fallen from $2.96 ninety days ago.

Competitors to Watch: drugstore.com, inc. , Graymark Healthcare Inc , CVS Caremark Corporation , Rite Aid Corporation , PetMed Express, Inc. , China Nepstar Chain Drugstore Ltd. , GNC Acquisition Hldgs. Inc , PharMerica Corporation , BioScrip Inc. , and Medco Health Solutions Inc. .

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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