Walgreen Boots Alliance (WBA, Financial) stock is down 1.5% at closing on Tuesday after rallying over 1.5% on Monday, March 27. The company is slated to release its fiscal second-quarter earnings on March 28.
The company will release its earnings before the opening bell on Wednesday.
Analysts forecast earnings of $1.55 per share, surpassing earnings of $1.36 a share during the same period a year prior. The company's stock remains down 11.7% on the year. The stock has fallen from a 12-month high of over $86 a share to $67 a share, a decline of over 22%.
The drug store's stock is down over 10% since the start of the 2018 trading year.
Walgreens has trended lower in recent months despite the company's quarterly earnings reports surpassing expectations. The company has been acquiring Rite Aid (RAD) stores in an effort to increase its market share and revenue. Walgreens has purchased nearly 1,650 stores in a deal valued at $3.6 billion.
Investors remain concerned about increasing competition, which will have an impact on the company's profit margins. Walgreens has outperformed the industry in the trailing 30-day period between Feb. 27 and March 27. The company's stock fell over 5% during that time, while the retail drug market has fallen 7.3%.
Medicare Part D growth is expected to increase the company's strength going into the final quarters of the fiscal year. The modified deal with Rite Aid is expected to increase Walgreen's presence in the northeast market. Walgreens is going to benefit from synergies valued at around $300 million in the next four years, which will help to increase the retail pharmacy's profit margins even further.
Walgreens' stock has a lot going for it, and the drug store chain appears to be working on solid growth initiatives. The company purchased a 40% stake in China's Sinopharm Holding Guoda Drugstores. The stake is expected to increase Walgreen's worldwide retail business. Walgreens is also benefitting from news that the 7th Circuit court found the company not guilty in an ongoing personal injury lawsuit.
Growth initiatives at Walgreens may not be enough to stop investors from taking a bearish approach to the company. The company is facing increasing competition and difficult industry conditions that are expected to get worse. The company's slowdown in generics has started to take a toll on its earnings. Reimbursement pressure continues to be a growing problem, too.
Walgreens has started to realize profits from its digital efforts. The company's retail refill scripts are now increasing online, with more than 20% of refill scripts coming through the company's mobile app. The Walgreens app has been downloaded 50 million times since launch.
Zacks Consensus Estimate has the company posting revenues of $31.99 billion, a rise of 8.6% on a year-over-year basis.
Walgreens will also be increasing its efforts with Express Scripts Holding Company. The expanded efforts will allow for specialty brand drugs to be available at the company's retail outlets.
Gross margins will be an area of focus in the company's most recent quarterly report, with contraction reported last quarter.
Disclosure: Writer has no stake in the listed equities.
