Walgreens Boots (WBA) Q2 earnings best estimates, margins up
Walgreens Boots Alliance, Inc. WBA reported adjusted earnings per share (EPS) from continuing operations of $1.59 for the second quarter of fiscal 2022, up 26.2% from the prior year figure (up 26 .5% at constant exchange rate or CER). The figure also topped Zacks’ consensus estimate of 14.4%.
GAAP EPS from continuing operations for the second quarter of fiscal 2022 was $1.02 compared to $1.06 a year ago, representing a decrease of 3.4%.
Walgreens Boots reported total sales of $33.76 billion for the second fiscal quarter, up 2.9% year-over-year and 3.8% at CER. The upper line also exceeded the Zacks consensus estimate by 0.2%.
Following Walgreens Boots’ announcement of the sale of the majority of its Alliance Healthcare business and part of the Retail Pharmacy International segment business in Europe to AmerisourceBergen, the company has reorganized the remaining businesses into two segments of operation: United States and International.
Segment sales totaled $27.70 billion for the fiscal second quarter, highlighting a 1.2% year-over-year improvement.
Comparable sales for the quarter increased 9.5% over the prior year quarter, reflecting a 7.3% increase in comparable drug store sales and a 14.7% increase in comparable retail sales.
Same-store prescriptions filled increased 4.7% from the prior year quarter, including a positive impact of nearly 275 basis points (bps) from COVID-19 vaccinations.
Drugstore sales were down 3.3% from the prior year quarter, negatively impacted by a 910 basis point headwind from the AllianceRx Walgreens business.
Retail sales increased 14.5% and comparable retail sales increased 14.7% year over year. Same-store retail sales (excluding tobacco and e-cigarettes) also increased 15.7% from the prior year quarter.
Walgreens Boots Alliance, Inc. Price, Consensus and Surprise EPS
Walgreens Boots Alliance, Inc. price-consensus-eps-surprise-chart | Walgreens Boots Alliance, Inc. Quote
Sales of health and wellness products rose 43.3%, supported by COVID-19 home testing and cough flu.
Personal care and beauty grew by 9.7% and 6.5% respectively.
International Division revenue increased 2.6% year-over-year to $5.60 billion for the fiscal second quarter. Sales increased by 7.5% at CER, reflecting the ongoing recovery in the UK market despite the headwind created by the Omicron variant.
Boots sales in the UK increased 15.2% and wholesale sales in Germany increased 2.5% in the second fiscal quarter.
Boots UK comparable retail sales increased 22%, driven by market share gains across all categories, led by beauty.
Gross profit for the reported quarter increased 13.7% year over year to $7.71 billion. Gross margin increased by 215 basis points to 22.8%.
Selling, general and administrative expenses increased 8.9% year over year to $6.57 billion.
Adjusted operating profit for the quarter was $1.14 billion, reflecting a 52.1% increase over the same period a year earlier. The operating margin was 3.4% for the quarter under review, reflecting a year-over-year expansion of 109 basis points.
Walgreens Boots ended the second quarter of fiscal 2022 with cash and cash equivalents of $1.89 billion, compared to $1.19 billion recorded at the end of the first quarter of the fiscal year. Total debt was $13.31 billion at the end of the second quarter of fiscal year, compared to $8.98 billion at the end of the first quarter of fiscal 2021.
Net cash provided by operating activities at the end of the second quarter of fiscal 2022 was $2.18 billion, down from $2.56 billion a year earlier.
The company has a 5-year annualized dividend growth rate of 5.18%.
Directions for the 2022 financial year
The company restored the full-year Adjusted EPS guidance to low single-digit growth. The Zacks consensus estimate for the same is pegged at $5.03.
Walgreens Boots ended the second quarter of fiscal 2022 with better-than-expected earnings and revenue. The impressive performance of the two operating segments gives cause for optimism. Robust Boots.com sales inspire investor confidence. Strong execution across all business segments, led by vaccinations and COVID-19 testing, is encouraging. The company saw continued momentum online in the second quarter, with digital sales up 38% in the United States. The rollout of VillageMD continues with 94 co-located clinics open at the end of the second quarter, compared to an impressive 81 clinics at the end of the first quarter. During the second fiscal quarter, Walgreens administered more than 11.8 million COVID-19 vaccinations and 6.6 million COVID-19 tests. The continued acceleration of Walgreens omnichannel offerings and a significant increase in MyWalgreens memberships are notable benefits in the quarter. During the quarter, the company launched the Walgreens COVID-19 Index to advance early detection of the Omicron variant and to track variant activity by state, which is another benefit. The expansion of both margins also looks encouraging.
However, strong operating profit growth was offset by the working capital impact of lower AllianceRx Walgreens business, the year-over-year impact of government support related to the COVID-19 and increased capital expenditures. Additionally, pharmacy sales were also negatively impacted by the decline in AllianceRx business.
Zacks Ranking and Key Picks
Walgreens currently wears a Zacks rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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For 2023, IMCR’s earnings growth rate is estimated at 9.1%.
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