Walgreens Boots Alliance, Inc. (WBAs – Free Report) plans to release its first quarter 2023 results on January 5, before the market release.
In the fourth quarter, the company delivered an earnings surprise of 2.6%. The WBA’s earnings beat the Sachs consensus forecast in each of his four subsequent quarters, with average surprises him 10.61%.
Let’s take a look at how things formed prior to this announcement.
Walgreens may have benefited from continued strategic execution on both the U.S. and international fronts. The quarter’s top line likely benefited from the launch of its clinical trials business, which helped sponsors meet their trial goals while increasing the company’s participation, particularly among diverse populations. The top line could benefit from new Walgreens Health businesses that provide equitable, personalized, and whole-person health care to communities across America.
On its fourth-quarter earnings call, the company said it recognizes significant contributions from alternative profit sources for fiscal 2022. This includes the Walgreens Ad Group, which has grown 35%. This is expected to continue in the first quarter of 2023.
In December 2022, Walgreens sold its $800 million stake in AmerisourceBergen Corporation, contingent on the completion of the Rule 144 sale. This is a concurrent stock repurchase by AmerisourceBergen for approximately $200 million in proceeds. Proceeds will be used primarily to repay debt and finance the company’s strategic priorities, including the definitive agreement for VillageMD to acquire Summit Health-CityMD. This strategic move contributed to the company’s first quarter financial results and may have improved its debt position.
Walgreens is likely to record growth in its U.S. retail pharmacy business and expects demand for vaccinations and testing to rebound amid the spread of new virus variants over the first quarter months. The company delivered 35 million vaccinations in fiscal 2022, well above expectations. In addition, Pixel by Labcorp and the company’s expanded access to free at-home PCR kits via curbside and in-store pickup are expected to see strong customer support over the past few months. increase. This should have contributed to the top line in the first quarter as well.
Walgreens Boots Alliance, Inc. Pricing and EPS Surprise
In the United States, Walgreens’ retail business continues its impressive momentum through digital and omnichannel growth driven by the myWalgreens loyalty program, private label innovations and other profit streams. U.S. digital sales increased 37% in the fourth quarter, up from 74% in the same period last year. These developments likely contributed to Walgreens’ first-quarter earnings.
In fiscal 2022, Walgreens Boots added three strategic partners, Walgreens Health, Blue Shield of California, Clover, and Buckeye, to cover its eventual goal of over 2 million lives in calendar year 2022. This development could benefit the company’s top line in the reported quarter.
In the last reported quarter, the international business recorded continued recovery and strong performance across its retail portfolio, notably growth in UK boots and German wholesale business. We expect this trend to continue in the first quarter, driven by strong demand for COVID-19 and monkeypox testing and vaccination, online healthcare services, and beauty brands.
Sales in the fourth quarter of the financial year increased 6.6% year-on-year, reflecting growth in all international markets, with Boots UK up 6% and German wholesale up 6.8%. Walgreens said the integration of its wholesale business in Germany is progressing well and that operational synergies are ahead of schedule. This development is expected to accelerate international business in upcoming quarters.
The Walgreens Health segment may have benefited largely from its investments in Shields Health and VillageMD. VillageMD is a leader in national values-based care and currently operates more than 340 clinics, including approximately 150 co-located with Walgreens. In the fourth quarter of the fiscal year, Shields delivered her 48% pro forma sales growth. VillageMD and Shields are expected to drive pro forma revenue growth in future reported quarters by annualizing recent contract wins and expanding the value proposition with existing healthcare system partners.
Zacks Consensus estimates for total revenue of $32.96 billion for the first quarter of 2023 show a 2.8% decrease from the reported figure for the same quarter last year. The consensus mark for earnings is pegged at $1.14, suggesting a 32.1% year-on-year decline.
What the model suggests
According to our proven model, stocks with a combination of positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) are more likely to outperform estimates. increase. As you can see, that’s not the case here.
Revenue ESP: Walgreens’ earnings ESP is -4.70%. Earnings ESP filters help you find the best stocks to buy or sell before they’re reported.
Zack Rank: The company currently has Zacks Rank #2 (Buy).
Other stocks worth a look
Some stocks that rank better in the broader medical sector are: AMN Healthcare Service Co., Ltd. (AMNMore – free report), Boston Scientific Corporation (BSX – free report) and Merit Medical Systems Co., Ltd. (MMSI – free report).
AMN Healthcare, currently ranked No. 2 by Zacks, is estimated to have a long-term growth rate of 3.3%. AMN’s earnings have beaten Zacks consensus forecasts in all four quarters, averaging 10.9%.you can see See the full list of today’s #1 (strong buy) Zachs stocks here.
AMN Healthcare fell 10.6% compared to the industry’s 30.3% decline over the past year.
Boston Scientific, currently No. 2 in the Zachs Rank, estimates long-term growth at 10.3%. BSX earnings have beaten expectations in three of the last four quarters and underperformed in one quarter, averaging 1.9%.
Boston Scientific posted a profit of 6.8% against the industry’s 42.6% decline over the past year.
Merit Medical, currently ranked No. 2 by Zacks, is estimated to have an 11% long-term growth rate. MMSI earnings have beaten expectations in all four quarters, averaging 25.4%.
Merritt Medical posted a 13.7% rise compared to an 8.7% decline for the industry over the past year.
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