Walgreens Boots Alliance, Inc.
WBA
is slated to release second-quarter fiscal 2021 results on Mar 31, before market open.
In the last-reported quarter, the company reported an earnings surprise of 19.61%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on three occasions and missed the same in one, the average surprise being 1.54%. Let’s take a look at how things have shaped up prior to this announcement.
Factors at Play
Through the fiscal 2021 first quarter (September to November 2020 end), Walgreens Boots Alliance shifted a major part of its business to the digital platform, given the unrelenting continuation of the pandemic. Following this, the business is majorly transacted digitally and fulfilled via pickup, either in store or the drive-through via curbside collection, or home delivery. This development is likely to start getting reflected in the company’s revenues from the second quarter.
Retail Pharmacy USA
In the fiscal second quarter, Walgreens Boots is expected to have continued to register softness in both retail and pharmacy businesses due to the pandemic-led lower foot traffic and a fall in new-to-therapy prescriptions due to fewer doctor visits and elective procedures.
In the earlier-reported quarter, the company noted continued strength in health and wellness over the past few months. This favorable trend is likely to have continued through all the months of the fiscal second quarter due to increased health consciousness stemming from the pandemic-led crisis, thus boosting the company’s top line. However, continued softness in beauty category sales due to pandemic-led disruptions is likely to have dragged down the top line in the to-be-reported quarter.
The Zacks Consensus Estimate for Retail Pharmacy USA’s revenues is pegged at $28.45 billion, suggesting an upsurge of 8.3% from the year-ago quarter’s reported figure.
Retail Pharmacy International
The situation is expected to have remained grave for the company’s international businesses during the months of the fiscal second quarter, with international trade mostly at a standstill.
Walgreens Boots Alliance, Inc. Price and EPS Surprise
Walgreens Boots Alliance, Inc. price-eps-surprise
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Walgreens Boots Alliance, Inc. Quote
In the last-reported quarter, although sales declined year over year, the segment registered a significant sequential improvement, thus buoying optimism. However, revenues are expected to have remained depressed in the fiscal second quarter due to a renewed surge in infections and additional lockdowns across various geographies.
In the last-reported quarter, the company continued to face lower footfall across most of its stores of Boosts U.K., especially in the major high street and travel locations where Boots has a prominent store presence.
Nonetheless, Boots.com is likely to have continued with its stellar performance due to increasing digital transactions, continued social-distancing norms, ease of operation and localized lockdowns amid the pandemic, thus pushing up revenues in the to-be-reported quarter.
The Zacks Consensus Estimate for Retail Pharmacy International’s revenues is pegged at $2.59 billion, suggesting a decline of 15.7% from the year-ago quarter’s reported figure.
Pharmaceutical Wholesale
The Pharmaceutical Wholesale division has been performing quite impressively over the past few months. In the last-reported quarter, the segment registered robust growth despite the pandemic-led business challenges, including results of the company’s new joint venture in Germany, which were consolidated as of November 2020. The company has also been gaining from sales growth in emerging markets over the past few months. These developments are anticipated to have significantly contributed to the company’s fiscal second-quarter performance.
The Zacks Consensus Estimate for Pharmaceutical Wholesale’s revenues is pegged at $4.51 billion, suggesting a plunge of 36.8% from the last-reported quarter’s reported figure.
The ongoing collaboration with LabCorp (via which the companies have sought to open at least 600 LabCorp patient centers across the United States), as well as the multi-year Medicare agreement with UnitedHealthcare (which entails a new co-branded Medicare Advantage plan, with Walgreens being the exclusive Retail Pharmacy company), might have contributed to the company’s sales growth during the second quarter.
However, over the past few quarters, Walgreens Boots has been hit by an FDA crackdown on its sale of tobacco and e-cigarettes, especially to teenagers. Additionally, Brexit has been posing a huge threat to Walgreens as sales at its Boots U.K. stores dropped due to deteriorating consumer scenario in the United Kingdom. These downsides might have weighed on the company’s profit margins in the soon-to-be-reported quarter.
What Our Model Suggests
Per our proven model, a stock with a positive
Earnings ESP
and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) has good chances of beating estimates. However, this is not the case here as you can see:
Earnings ESP:
Walgreens Boots has an Earnings ESP of -1.75%. You can uncover the best stocks to buy or sell before they’re reported with our
Earnings ESP Filter
.
Zacks Rank:
The company currently carries a Zacks Rank #3.
Stocks Worth a Look
Here are a few medical stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.
ConforMIS, Inc.
CFMS
has an Earnings ESP of +6.67% and currently carries a Zacks Rank of 2. You can see
the complete list of today’s Zacks #1 Rank stocks here.
Cantel Medical Corp.
CMD
has an Earnings ESP of +14.04% and is a Zacks #2 Ranked stock.
HCA Healthcare, Inc.
HCA
has an Earnings ESP of +6.97% and carries a Zacks Rank of 2 at present.
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