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Walgreens Boots (WBA) Q3 Earnings Top Estimates, 2021 View Up

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·6 min read
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Walgreens Boots Alliance, Inc. WBA reported adjusted earnings per share (“EPS”) of $1.38 from continuing operations for third-quarter fiscal 2021, up from the year-ago figure of EPS of 71 cents by 94.4% (up 93.6% at constant exchange rate or CER. The figure surpassed the Zacks Consensus Estimate by 24.3%.

The quarter’s total adjusted EPS was $1.51, up 81.9% year over year (up 81.4% at CER).

GAAP EPS from continuing operations for third-quarter fiscal 2021 was $1.27, up from the year-ago loss of $2.05

Total Sales

Walgreens Boots recorded total sales of $34.03 billion in the fiscal third quarter, up 12.1% year over year and up 10.4% at CER. The top line surpassed the Zacks Consensus Estimate by 0.9%.

The company stated that the top line reflects strong growth in the International segment, aided by the formation of the company's joint venture in Germany during the fiscal year, and solid growth in the United States segment.

Segments in Detail

Following Walgreens Boots’ announcement regarding the sale of the majority its Alliance Healthcare business and a portion of the Retail Pharmacy International segment's businesses in Europe to AmerisourceBergen, the company has reorganized its remaining businesses into two reportable operating segments — United States and International.

United States

The segment’s sales totaled $28.74 billion in the fiscal third quarter, highlighting an improvement of 5.1% year over year.

Comparable sales in the quarter increased 6.4% from the year-ago quarter, reflecting an 8.4% uptick in comparable pharmacy sales and a 1.7% rise in comparable retail sales.

Total prescriptions (adjusted to 30-day equivalents) filled in the third quarter rose 8.7% year over year. In comparable sales, prescriptions filled increased 9.8% from the year-ago quarter.

Pharmacy sales were up 6.3% from the year-ago quarter.

Retail sales increased 1.4% (including adverse impacts from the store-optimization programs).

Comparable retail sales increased 1.7%, year on year, reflecting mass personalization and strength in beauty and photo, aided by improved traffic trends. Comparable retail sales (excluding tobacco and e-cigarettes) increased 2.6%.

International

Revenues at the International division surged 75.8% on a year-over-year basis to $5.29 billion, in fiscal third quarter. Sales were up 58.7% at CER, entirely due to the company's new joint venture (“JV”) in Germany, which was consolidated as of November 2020.

Excluding incremental sales from the JV, the International segment’s sales increased 12.1% at CER, reflecting a partial recovery in the UK market as COVID-19-induced restrictions were eased.

Boots UK’s comparable retail sales increased 38.7% as footfall on the high street showed early signs of recovery amid a partial easing of strict lockdown measures.

Boots UK’s comparable pharmacy sales inched up 3.7%, driven by stronger pharmacy services and favorable timing of NHS reimbursement, partially offset by lower prescription volume.

Margins

Gross profit in the reported quarter increased 20.1% year over year to $7.15 billion. Gross margin expanded 140 basis points (bps) to 21%.

Selling, general and administrative (SG&A) expenses were down 22.4% year over year to $6.12 billion.

Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise

Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise
Walgreens Boots Alliance, Inc. Price, Consensus and EPS Surprise

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

Adjusted operating profit in the quarter was $1.04 billion against operating loss of $1.92 billion a year ago. Operation margin was 3% in the reported quarter.

Financial Condition

Walgreens Boots exited the third quarter of fiscal 2021 with cash and cash equivalents of $1.35 billion compared with $1.03 billion recorded at the end of the second quarter of fiscal 2021. Total debt was $15.70 billion at the end of the third quarter of fiscal 2021, down from $16.16 billion at the end of the second quarter of fiscal 2021.

Cumulative net cash provided by operating activities at the end of the third quarter of fiscal 2021 was $4.31 billion, up from the year-ago period’s $3.39 billion.

Fiscal 2021 Guidance

Walgreens Boots has raised its fiscal 2021 guidance to around 10% growth in constant-currency-adjusted EPS from continuing operations (earlier, the company projected to report adjusted EPS at CER growth in mid-to-high single-digit growth).

Per the company, the revised guidance reflects strong results in the third quarter and greater clarity on the impact of COVID-19 vaccinations.

Our Take

Walgreens Boots exited third-quarter fiscal 2021 with better-than-expected earnings and revenues. Impressive performance by both the operating segments buoys optimism. The robust sales of Boots.com instill investor confidence. Strong growth in the International segment, aided by the formation of the company's joint venture in Germany during the fiscal year, and solid growth in the United States segment, are encouraging. Faster adoption of Walgreens Find Care platform is again a plus. Faster retail pick-up in the United States, along with acceleration of its investment in VillageMD and boosting the rollout of Village Medical at Walgreens full-service primary care clinics, look encouraging. The company has raised its 2021 guidance, which is an indicative of this bullish trend to continue. However, persistent reimbursement pressure and competitive market remains a concern.

Zacks Rank and Key Picks

Walgreens Boots currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are Apollo Medical Holdings, Inc. AMEH, AMN Healthcare Services Inc. AMN and Veeva Systems Inc. VEEV.

Apollo Medical Holdings reported first-quarter 2021 adjusted EPS of 30 cents, beating the Zacks Consensus Estimate by 36.4%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare, a Zacks Rank #1 company, reported first-quarter 2021 adjusted EPS of $1.70, beating the Zacks Consensus Estimate by 25%. Revenues of $885.9 million outpaced the consensus mark by 9.2%.

Veeva Systems reported first-quarter 2021 adjusted EPS of 91 cents, surpassing the Zacks Consensus Estimate by 16.7%. Net revenues of $433.6 million outpaced the consensus estimate by 5.9%. It currently carries a Zacks Rank #2 (Buy).

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