Walgreens reported quarterly earnings that blew past analyst expectations, sending shares up almost 5%.
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The drugstore behemoth Walgreens Boots Alliance reported quarterly earnings on Thursday morning that blew past analyst expectations, sending shares of the company up almost 5%.
Walgreens (ticker: WBA) reported adjusted earnings of $1.22 per share, down 11.6% from the same quarter last year but more than 17% higher than the $1.04 per share analysts expected, according to the S&P Capital IQ Consensus estimate.
That’s the company’s biggest earnings beat in years, and a hopeful sign for a stock that has fallen 38.5% over the past two years, a period in which the S&P 500 has climbed 47%.
“Our first quarter results exceeded expectations as we continue to deliver on our strategic priorities,” the company’s CEO, Stefano Pessina, said in a statement. “While the business environment remains challenging, we are rising to the occasion with agility and discipline and we are confident in our outlook for adjusted EPS for the fiscal year.”
The earnings report comes a day after Walgreens announced the $6.5 billion sale of the majority of its international drug distribution business to AmerisourceBergen (ABC), the large drug distributor. AmerisourceBergen will pay $6.3 billion in cash and another $200 million in shares of its stock. Shares of Walgreens rose 4.5% on Wednesday, while shares of AmerisourceBergen rose 8.6%.
Also on Wednesday, Walgreens said that the primary-care clinic network VillageMD would open up to 700 clinics inside its stores over the next four years. The announcement represents a renegotiation of a deal announced in July, which will speed up both the terms of Walgreen’s $1 billion investment in VillageMD and the rollout of the clinics.
“Coupled with yesterday’s announcement regarding the divestiture of the wholesale business, along with what we view as generally low investor expectations heading into this morning’s print, we are not surprised to see the shares bidding modestly higher in the premarket,” Guggenheim analyst Glen Santangelo, who rates the stock Neutral, wrote in a note shortly after Walgreens announced its results.
Evercore ISI analyst Elizabeth Anderson, who has an In Line rating on Walgreens, called the earnings report a “good start” to the new fiscal year.
Walgreens reported sales for the first quarter of its 2021 fiscal year of $36.3 billion, beating the Wall Street consensus estimate of $34.9 billion, according to FactSet. The company said it would maintain its earnings guidance of “low single-digit growth” for its 2021 fiscal year, saying it expects an increased impact from the Covid-19 pandemic in the second quarter.
Analysts on Wednesday had cheered the deal between Walgreens and AmerisourceBergen, saying it would allow Walgreens to invest more in its core pharmacy businesses. “For WBA, we find the transaction interesting and should provide capital to grow its base pharmacy business,” Mizuho’s Ann Hynes wrote. “WBA has mostly steered clear of M&A in recent years given the lofty industry valuations driven by vertical consolidation. We think WBA would be open to M&A on a smaller scale.”
Truist analyst David MacDonald, who has a Hold rating on Walgreens, said the AmerisourceBergen deal “provides incremental financial flexibility, additional resources for accelerated investment, [and] will allow WBA to further increase its focus on its core Retail Pharmacy business.”
Walgreens shares were up 4.8%, at $45.12, in recent trading. The S&P 500 was up 1.3%.
Write to Josh Nathan-Kazis at [email protected]
