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Is Walgreens Boots (WBA) Likely to Disappoint in Q4 Earnings?

Zacks Equity Research

Walgreens Boots Alliance, Inc. WBA is slated to release fourth-quarter fiscal 2019 results on Oct 28, before market opens.

In the last reported quarter, the company witnessed a positive earnings surprise of 3.52%. Its earnings outperformed the Zacks Consensus Estimate in three of the last four quarters, the average positive surprise being 1.22%.

Let’s take a look at how things are shaping up prior to this announcement.

Key Catalysts

Within Retail Pharmacy USA division, Walgreens Boots is benefiting from the transfer of prescriptions from Rite Aid stores. We believe that the favorable trend of prescription volume growth and brand inflation in the United States is likely to reflect on the upcoming quarterly results.

Increase in comparable pharmacy sales and comparable prescriptions is also expected to have driven growth in the segment during the fourth quarter of fiscal 2019.

Walgreens Boots Alliance, Inc. Price and EPS Surprise

 

Walgreens Boots Alliance, Inc. Price and EPS Surprise

Walgreens Boots Alliance, Inc. price-eps-surprise | Walgreens Boots Alliance, Inc. Quote

Several developments, including early benefits from new pharmacy contract wins and volume expansion owing to previously-announced pharmacy partnerships, like that of Express Scripts, have been driving growth in this space of late. This is expected to have contributed to the company’s top line. 

On the flip side, Walgreens Boots’ revenue growth within the retail Pharmacy USA division of late is getting hampered due by the company’s store optimization program. Further, persistent de-emphasizing of tobacco is hurting growth, which should again get reflected in the quarterly results.

Overall, the Zacks Consensus Estimate for fourth-quarter Retail Pharmacy USA division revenues is pegged at $26.20 billion, indicating a rise of 17.5% from the year-ago reported figure.

Meanwhile, tough market conditions, particularly in retail, have been inducing sluggishness in the Retail Pharmacy International division.Sales decline in Boots U.K. and the impact of temporary industry-wide NHS underfunding and higher generic pricingon the company’s U.K. pharmacy business are expected to show on fourth-quarter results. Meanwhile, Walgreens Boots is investing in new stores and digital content to progress in the U.K. retail segment.

The Zacks Consensus Estimate of $2.78 billion for revenues from the Retail Pharmacy International division suggests a 5.4% drop from the prior-year reported number.

Strong growth in certain emerging markets is likely to have driven the company’s Pharmaceutical Wholesale division during the fourth quarter.

The Zacks Consensus Estimate for Pharmaceutical Wholesale division revenues of $5.69 billion implies 4.6% growth from the year-earlier reported figure.

Earnings Whispers

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise. This is not the case here as you will see below.

Earnings ESP: Walgreens Boots Alliance has an Earnings ESP of -0.12%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank:Walgreens Boots Alliance carries a Zacks Rank #4 (Sell).

Stocks Worth a Look

Here are a few medical stocks worth considering from the same space with the right mix of elements to surpass expectations this earnings season.

Alexion Pharmaceuticals, Inc ALXN has an Earnings ESP of +1.22% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vertex Pharmaceuticals VRTX has an Earnings ESP of +2.24% and a Zacks Rank #1.

DENTSPLY SIRONA XRAY has an Earnings ESP of +5.05% and a Zacks Rank of 3.

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Vertex Pharmaceuticals Incorporated (VRTX) : Free Stock Analysis Report
 
Alexion Pharmaceuticals, Inc. (ALXN) : Free Stock Analysis Report
 
DENTSPLY SIRONA Inc. (XRAY) : Free Stock Analysis Report
 
Walgreens Boots Alliance, Inc. (WBA) : Free Stock Analysis Report
 
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