Drugstore chain Walgreens Boots Alliance Inc. (WBA, Financial) reported its results for the fourth quarter and fiscal 2017 before the opening bell on Oct. 25.
The Illinois-based company posted adjusted earnings per share of $1.31, beating estimates of $1.21. Quarterly revenue of $30.15 billion beat expectations of $29.93 billion and increased 5.3% from the year-ago quarter.
For the year, the company recorded adjusted EPS of $5.10 on revenue of $118.2 billion.
Following the announcement, shares rose 4.3% in premarket trading to $70.15 before reversing after the market opened.
The trend in Walgreens’ revenue growth over the past decade is illustrated in the graph below.
"We are pleased to report the company has performed well, with our businesses delivering significant progress while managing against ongoing prescription reimbursement pressure and competing in fast-changing retail environments,” Stefano Pessina, executive vice chairman and CEO, said.
Earlier this year, Walgreens formed a specialty pharmacy and mail services business called AllianceRx Walgreens Prime, which helped the company fill more prescriptions during the quarter. Sales for the company’s U.S. retail pharmacy business grew 7.5% from the prior-year quarter to $22.3 billion. Comparable store sales increased 3.1%, but overall retail sales declined 3.9% due to the “closure of certain e-commerce operations.”
After abandoning a merger deal with Rite Aid Corp. (RAD, Financial) earlier this year due to regulatory issues, Walgreens paid a more than $300 million fee, which hurt its earnings for the quarter. In September, the company entered a new agreement to purchase nearly 2,000 Rite Aid stores, three distribution centers and related inventory for $4.37 billion. Walgreens said it will spend an estimated $750 million over the next three years to integrate these stores and another $500 million on store conversions and related activities.
“We look forward to building on this solid underlying growth in the year to come, enhanced by the expansion of our U.S. retail pharmacy network through the upcoming purchases of Rite Aid stores," Pessina said.
For fiscal 2018, the company expects adjusted EPS between $5.40 and $5.70.
Of the 17 gurus invested in Walgreens, the Vanguard Health Care Fund (Trades, Portfolio) has the largest position with 0.75% of outstanding shares. Bill Gates (Trades, Portfolio), Andreas Halvorsen (Trades, Portfolio), Tom Gayner (Trades, Portfolio) and Larry Robbins (Trades, Portfolio) are other top shareholders.
Walgreens has a market cap of $72.14 billion; its shares were trading around $66.48 on Wednesday with a price-earnings (P/E) ratio of 17.02, a price-book (P/B) ratio of 2.35 and a price-sales (P/S) ratio of 0.63. According to GuruFocus data, the stock has lost 19% year to date.
Disclosure: I do not own any stocks mentioned.
