It's More Than Earnings Holding Back Walgreens

Walgreens Boots Alliance Inc. (NASDAQ: WBA) slid on Thursday after the company reported its fiscal third-quarter financial results. The company said that it had $0.83 in earnings per share (EPS) and $34.6 billion in revenue, which fell short of consensus estimates that called for $1.17 in EPS and $34.35 billion in revenue. The same period of last year reportedly had EPS of $1.47 in EPS and revenue of $34.59 billion.

During the fiscal third quarter, sales increased 0.1%, or 1.2% on a constant currency basis, led by Retail Pharmacy USA comparable sales growth of 3.0%.

Retail Pharmacy USA segment sales increased 3.2% to $27.4 billion, including the impact of previously announced store closures. Sales in comparable stores increased 3.0% from the year-ago quarter.

Retail Pharmacy International had third-quarter sales of $1.9 billion, a decrease of 31.5% year over year, including an adverse currency impact of 5.3%. Sales decreased 26.2% on a constant currency basis, mainly due to a 27.7% decrease in Boots UK sales as foot traffic in stores was severely disrupted by COVID-19 restrictions.

Pharmaceutical Wholesale had a third-quarter sales increase of 0.6% to $5.9 billion, including an adverse currency impact of 4.8%. On a constant currency basis, sales increased 5.3%, led by the United Kingdom and Germany.

Net cash from operating activities totaled $3.4 billion, an increase of $183 million from last year. Free cash flow increased 23.7% to $2.4 billion. The company ended the quarter with $768 million in cash and cash equivalents on the books, compared with $1.02 billion at the end of fiscal 2019.

Looking ahead, Walgreens expects to see full fiscal year EPS in the range of $4.65 to $4.75, including an estimated impact of COVID-19 of $1.03 to $1.14 per share. For the year, analysts are calling for $5.42 in EPS and $139.26 billion in revenue.

Walgreens stock traded down 9% on Thursday, at $38.41 in a 52-week range of $36.65 to $64.50. The consensus price target is $45.76.