Walgreens Boots Alliance Lives Up To Expectations

The Reversal In Walgreens Boots Alliance Gains Momentum

Walgreens Boots Alliance (NASDAQ: WBA) is one of our best picks for value-minded dividend growth investors for many reasons. To start, the company is deep into a global rationalization that has it back in growth mode and on track for double-digit gains in the coming year. Add to that a deep value, a safe and growing dividend, and better-than-expected results, and the stage is set for a major, long-term rally.

"This quarter's results demonstrate continued momentum, and while challenges lie ahead, we are in a strong position to grow and innovate our core retail and pharmacy businesses for the future. We are accelerating our investments to advance our operational excellence, including technology innovations that support mass personalization, pharmacy of the future, and the next phase of growth in tech-enabled healthcare," said Chief Executive Officer Rosalind Brewer.

Walgreens Boots Alliance Strategy Pays Off

Walgreens Boots Alliance had a great third quarter and one that enabled the company to increase its guidance. While the one-year and two-year comparisons for revenue are technically down, those comparisons don't reflect the impact of divestitures that have allowed the company to pay down its debt, pay for growth initiatives, and reposition itself for the future. With that taken into consideration, the $34.03 billion in net consolidated revenue is up 12.1% from the previous year and beat the consensus by $560 dollars or 170 basis points.

Revenue increases were driven by strength in all operating segments. Revenue from continuing operations grew about 12% with the US segment up 5.1% and the international segment up 75.8%. Within the US, comp sales were up 6.4% on an 8.4% gain in pharmacy and a 1.7% gain in retail sales. Pharmacy sales were, notably, positively impacted by COVID-19 vaccinations to the tune of 600 basis points. In the international segment, the 75.8% increase includes a 1700 basis point impact from favorable foreign exchange and the positive impact from the new joint venture in Germany. X-FX, International sales are up 58% with a strong showing from Boots. Sales at Boots are up 7% for pharmacy, 38.7% for retail, and 42.9% via eCommerce channels.

Moving down the report, the company experienced a significant improvement in margins that reversed a loss in the year-ago period. On the bottom line, the company's total earnings per share including discontinued operations were $1.38 compared to a loss of $1.95 last year while adjusted EPS increased 83.4% to $1.51 and EPS from continuing operations improved to $1.27 compared to a loss of $2.05.

Guidance Drives Walgreens Boots Alliance Higher

Walgreens didn't give formal guidance in the form of revenue or earnings target's but it did up its expectation for EPS growth. The company increased its target for EPS growth from mid to high-single digits to about 10% in fiscal 2021. That guidance assumes full-year EPS near $5.20 compared to the $4.74 consensus and fourth-quarter EPS of $1..22 compared to the expectation of $1.15.

Shares of Walgreens Boots Alliance are up 2% in early pre-market trading following the release of the Q3 earnings report. The move has price action above the short-term moving average where it appears to be confirming a buy signal and the continuation of a reversal that began late last year.

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