What’s In Store for Walgreens in Fiscal 3Q16?

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Part 5
What’s In Store for Walgreens in Fiscal 3Q16? PART 5 OF 5

Exploring WBA’s Fiscal 2Q16 ahead of Its Fiscal 3Q16 Earnings

A Look at WBA’s top line in fiscal 2Q16

In fiscal 2Q16, Walgreens Boots Alliance (WBA) reported a 13.6% YoY (year-over-year) rise in total sales, which stood at $30.2 billion for the three months ended on February 29, 2016.

The company’s top line was negatively impacted by foreign currency translation adjustments of ~$750 million, or 2.4%.

Exploring WBA&#8217;s Fiscal 2Q16 ahead of Its Fiscal 3Q16 Earnings

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Revenue drivers in fiscal 2Q16

WBA’s top line was driven by a 2.1% rise in sales in its Retail Pharmacy USA division. This segment reported a 2.2% rise in comparable store sales during the quarter. Pharmacy sales, which accounted for ~65% of the division’s total sales, rose by 3.2% YoY.

Sales of the Retail Pharmacy International segment, which includes the legacy Alliance Boots pharmacy operations acquired by the company in December 2014, stood at $3.7 billion in fiscal 2Q16. Comparable pharmacy sales rose by 2.6% YoY, driven by growth in UK operations. Comparable retail sales rose by 2.1% YoY, driven by Boots’ growth in the United Kingdom and the Republic of Ireland.

The Pharmaceutical Wholesale division, which mainly operates under the Alliance Healthcare brand, reported fiscal 2Q16 total sales of $5.6 billion.

Profitability in fiscal 2Q16

Walgreens Boots Alliance reported an 11% YoY rise in its earnings per share (or EPS) to $1.31 in fiscal 2Q16, topping Wall Street analysts’ estimates by $0.03. The company’s better-than-expected earnings were the result of its Alliance Boots consolidation and its ongoing cost-control initiatives.

ETF investors seeking to add exposure to WBA can consider the iShares U.S. Consumer Services ETF (IYC). IYC invests 2.5% of its portfolio in WBA.

Comparing margin to peers

WBA’s trailing-12-month operating margin stands at 4.8%. In comparison, CVS Health (CVS), McKesson (MCK), and AmeriSourceBergenis (ABC) have operating margins of 5.9%, 1.9%, and 1.2%, respectively.


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