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Walgreens Boots (WBA) Q1 Earnings Top Estimates, 2022 View Up

Walgreens Boots' (WBA) revenues increased year over year in the fiscal first quarter, driven by COVID-19 vaccinations and testing.

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This story originally appeared on Zacks

Walgreens Boots Alliance, Inc. WBA reported adjusted earnings per share (“EPS”) from continuing operations of $1.68 for first-quarter fiscal 2022, increasing 54.1% from the year-ago comparable figure (up 53.1% at constant exchange rate or CER). The figure also surpassed the Zacks Consensus Estimate by 24.4%.

- Zacks

GAAP EPS from continuing operations for first-quarter fiscal 2022 was $4.13 compared with the year-ago loss per share of 45 cents.

Total Sales

Walgreens Boots recorded total sales of $33.90 billion for the fiscal first quarter, up 7.8% year over year and 7.6% at CER. The top line also surpassed the Zacks Consensus Estimate by 2.7%.

The company stated that the top line reflects strong growth in its core business, driven by COVID-19 vaccinations and testing.

Quarterly Details

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

United States

The segment’s sales totaled $28.00 billion for the fiscal first quarter, highlighting an improvement of 3.2% year over year.

Comparable sales for the quarter increased 7.9% from the year-ago quarter, reflecting a 6.8% uptick in comparable pharmacy sales and an 11.7% rise in comparable retail sales.

In comparable stores, prescriptions filled increased 6.2% from the year-ago quarter, including a positive impact of nearly 535 basis points from COVID-19 vaccinations.

Pharmacy sales were up 1.1% from the year-ago quarter.

Retail sales increased 10.1% and comparable retail sales grew 10.6% year on year. Comparable retail sales (excluding tobacco and e-cigarettes) also increased 11.7% from the prior-year quarter.

Health and wellness sales increased 24.7%, backed by cough cold flu, at-home COVID-19 tests and vitamins.

International

Revenues at the International division surged 35.8% on a year-over-year basis to $5.80 billion for the fiscal first quarter. Sales were up 34.2% at CER, driven by the company's new joint venture (“JV”) in Germany.

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

Excluding incremental sales from the JV, the International segment’s sales increased 8.6% year over year at CER, reflecting the ongoing recovery in the U.K. market following the lifting of COVID-19 restrictions in July.

Boots UK’s comparable retail sales increased 16.3%, driven by robust demand for pharmacy services, particularly COVID-19 tests.

Margins

Gross profit for the reported quarter increased 14.3% year over year to $7.57 billion. Gross margin expanded 126 basis points (bps) to 22.3%.

Selling, general and administrative expenses were up 10.3% year over year to $6.39 billion.

Adjusted operating profit for the quarter was $1.18 billion, reflecting a 41.3% surge from the year-ago period. Operating margin was 3.5% for the reported quarter, reflecting an 83-bps expansion year over year.

Financial Condition

Walgreens Boots exited the first quarter of fiscal 2022 with cash and cash equivalents of $4.14 billion compared with $1.19 billion recorded at fiscal fourth-quarter end. Total debt was $13.84 billion at fiscal first-quarter end, up from $8.98 billion at fourth-quarter fiscal 2021 end.

Net cash provided by operating activities at the end of first-quarter fiscal 2022 was $1.09 billion, down from the year-ago period’s $1.19 billion.

Fiscal 2022 Guidance

The company has increased full-year adjusted EPS guidance to low-single-digit growth (up from the earlier projection of no growth compared to fiscal 2021). The company continues to anticipate 4% negative impact from previously planned healthcare investments. The Zacks Consensus Estimate for the same is pegged at $4.96.

Our Take   

Walgreens Boots exited first-quarter fiscal 2022 with better-than-expected earnings and revenues. Impressive performance by both the operating segments buoys optimism. 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 and solid growth in the United States segment are encouraging.

During the fiscal first quarter, Walgreens had administered more than 15.6 million COVID-19 vaccinations and 6.5 million COVID-19 tests. Continued acceleration of Walgreens omnichannel offerings and a rise in MyWalgreens membership are notable upsides during the quarter.

Zacks Rank and Key Picks

Walgreens currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

ModivCare Inc. MODV currently has an Earnings ESP of +1.25% and sports a Zacks Rank #1.

ModivCare’s long-term earnings growth rate is estimated at 12%. MODV’s earnings yield of 5% compares favorably with the industry’s (1.4%).

Henry Schein, Inc. HSIC currently has an Earnings ESP of +3.33% and carries a Zacks Rank #2 (Buy).

Henry Schein’s long-term earnings growth rate is estimated at 11.3%. HSIC’s earnings yield of 5.9% compares favorably with the industry’s 3.9%.

ResMed Inc. RMD currently has an Earnings ESP of +1.59% and a Zacks Rank #2.

ResMed long-term earnings growth rate is estimated at 15.8%. RMD’s earnings yield of 2.6% compares favorably with the industry’s (0.1%).



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