Walgreens Boots Alliance Inc (Nasdaq: WBA) reported fiscal 2021 first-quarter earnings and revenue that beat Wall Street estimates. The company attributed the strong performance to higher-than-anticipated pharmacy sales. Furthermore, Walgreens also reaffirmed its FY 2021 adjusted earnings growth outlook. Following the results, the stock gained $2.23 or 5.18% to close at $45.26. In the last one year, the stock had declined by about 28%.
Deerfield, Illinois-based WBA, reported first-quarter sales of $36.307 billion, compared with $34.339 billion in the comparable period last year.
For the quarter ended November 30, 2020, the company swung to a net loss of $308 million or $0.36 per share, from a net profit of $845 million, or $0.95 a share in the quarter ended 2019. The loss was purely because of the company’s charges for its investment in Chesterbrook, Pennsylvania based Amerisourcebergen Corp (NYSE: ABC).
Excluding charges, adjusted net earnings for 1Q 2021 was $1.052 billion, or $1.22 a share, compared with $1.222 billion, or $1.37 per share in 1Q 2020.
Analysts surveyed by Refinitiv had anticipated the company to post earnings of $1.03 per share on revenues of $34.95 billion.
Commenting on the results, Executive Vice Chairman and CEO Stefano Pessina said, “Our first-quarter results exceeded expectations as we continue to deliver on our strategic priorities. As announced yesterday, we have taken a major step forward in our transformation; we are divesting our pharmaceutical wholesale business with plans to use the proceeds to accelerate our investments in healthcare.”
Segment-wise,
- Retail Pharmacy USA posted Q1 sales of $27.20 billion, increasing 3.9% on a y-o-y basis. Same-store sales rose 2.7% compared with last year (including the negative impact of 2.10% from COVID-19).
- Retail Pharmacy International recorded a 6.2% y-o-y decrease in revenues to $2.60 billion. Boots UK Comp (pharmacy) sales rose 2.5% y-o-y. The figure includes the positive impact of the National Health System (NHS) compensation, which nullified the effect of a decline in prescription volume and a drop in demand for pharmacy-related services during the COVID-19 outbreak.
- Pharmaceutical Wholesale reported revenues of $7.10 billion, up 18.6% on a y-o-y basis. The segment posted an operating loss of $1.30 billion, solely due to a loss of $1.40 billion associated with its investment in AmerisourceBergen.
Walgreens stated that its pharmacy sales have improved in the US as a higher number of prescriptions was completed. Comp (pharmacy) sales increased 5% on a y-o-y basis. The increase in sales was recorded despite a drop in foot traffic and a decline in sales of cold, cough, and flu drugs.
During the first quarter, operating activities’ net cash increased $134 million to $1.2 billion. Likewise, free cash flow increased 13% ($90 million) to $763 million.
The health and wellbeing company reaffirmed its FY 2021 view of low single-digit growth in non-GAAP earnings per share. The company has stated that it expects the first half of FY 2021 earnings (adjusted) to be broadly in-line with earlier forecasts.
Walgreens cautioned that lockdown in the UK would harm its performance. The company is also selling its European drug distribution division to AmerisourceBergen for $6.50 billion. Walgreens has clarified that the divestment would enable the company to focus on its core pharmacy business.
The company began administering COVID-19 vaccines last month to employees and inhabitants of nursing homes and other care centers. In the future, the company intends to offer the drug to the general public through its retail stores.
The quarterly earnings beat and reaffirmation of FY 2021 earnings growth outlook is expected to keep the stock range-bound with a slight bullish bias in the short-term.
The historical price chart indicates that the stock of Walgreens has closed above its 50-day moving average. The stock also has reliable support at 40, and the next resistance is anticipated only near 57. Additionally, the Chaikin money flow indicator’s reading has turned positive. Therefore, we are anticipating the stock to rally in the days ahead.
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