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Shares of Walgreens Boots Alliance (WBAFree Walgreens Boots Alliance Stock Report) traded higher in price following the release of the pharmacy services giant's fiscal third-quarter financial results and management's reaffirmation of full-year guidance. (Fiscal years end August 31st.) Indeed, the news seemed to help alleviate some of Wall Street's concerns that were raised from the company's poor second-quarter showing and management's decision to drastically slash guidance just a few months ago.

Earnings for the May quarter came in at $1.47 a share (on an adjusted basis), down more than a nickel from the year-earlier tally, but ahead of expectations. We had been looking for share net of $1.45 and the consensus estimate was $1.43. The top line also impressed, increasing 0.7% (2.9% on a constant-currency basis), thanks to traction at the Retail Pharmacy USA and Pharmaceutical Wholesale divisions. The former posted a 2.3% uptick in sales, on a 6.0% improvement in comparable-pharmacy sales. Prescriptions filled in comparable stores increased 4.7%.

Not all the news was exactly good, in our opinion, however. Despite the top-line momentum, the gross profit at the U.S. Retail Pharmacy business declined 3.6% due to ongoing reimbursement pressure. Meanwhile, the Retail International Pharmacy segment appears to be struggling, inking a 7.3% sales dip in the May quarter and an even bigger decline in operating income. And, while management's decision to maintain its earnings guidance for all of fiscal 2019, this calls for a flattish bottom-line result for the August period.

Our fourth-quarter expectations are nothing to write home about. While we have tacked a few cents onto our share-earnings estimate, and upped our full-year assumption by a nickel, to $6.05, both imply just modest growth. We suspect that a similar story will continue to play out, limiting any bottom-line upside.

Regardless of the aforementioned headwinds, we still think that these shares hold worthwhile long-term appeal. The company is in the middle of several cost-cutting initiatives that are expected to, in sum, deliver more than $1.5 billion in annual savings over the next few years. We see a decent portion of these benefits hitting the bottom line in fiscal 2020, helping to drive a 6% share-earnings advance. We are now modeling for earnings of $6.40 a share next year.

We still like these shares as a long-term holding. Although the stock seems to have plateaued in recent weeks, it is down sharply over the past few months and has been the worst performing member of the Dow, year to date. However, this presents a favorable entry point for buy-and-hold investors. Walgreens remains a leader in the space and looks to have the size and financial means to adapt to the changing industry landscape. Adding it all up, we expect Walgreens to produce healthy risk-adjusted total-return prospects three to five year out.

About the Company:  Walgreens Boots Alliance is one of the world’s premiere prescription drug providers, anchored by its network of drug stores in the United States and Europe. Currently, it operates more than 13,200 stores across 11 countries. It most recently acquired 1,932 Rite Aid locations, solidifying its domestic footprint.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.