How Could Walgreens’ Bottom Line Shape Up in Fiscal 2018?



Walgreens’ earnings to jump 14.5% in 1Q18

Walgreens Boots Alliance’s (WBA) earnings are projected to rise 14.5% YoY (year-over-year), according to Wall Street, during the first quarter of 2018. The company is likely to report $1.26 in profit per share when it reports its results on January 4. The pharmacy giant hasn’t missed Wall Street expectations over the last 13 consecutive quarters.

For full-year fiscal 2018, the company’s EPS (or earnings per share) are anticipated to increase 8.9% to $5.56, which is in line with management’s guidance. Management has projected fiscal 2018 earnings per share in the $5.40–$5.70 range, which translates to an 8.8% YoY jump at the mid-point.

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The recent hurricanes—especially in Puerto Rico, where WBA is the largest pharmacy chain—are likely to impact fiscal 2018 EPS. Management has estimated $90 million in costs related to the storm damage and store closures and plans to make adjustments for the same during the first quarter. So 1Q18 earnings would be adversely impacted by a few cents from these costs.

Discussing WBA’s earnings growth in fiscal 2017

During fiscal 2017, Walgreens’ adjusted diluted net earnings per share rose 11% YoY to $5.10. After adjusting for currency fluctuations, EPS were up 12.9% compared with the year-ago period.

WBA’s recent partnerships with insurance companies and pharmacy benefit managers, as well as its ongoing cost control initiatives drove the majority of this earnings growth.

Comparing Walgreens’ profitability to CVS Health

Walgreens recorded an operating margin of 4.7% over the last 12 months (or LTM). In comparison, CVS Health (CVS) recorded an LTM operating margin of 5.1%. Better margins at CVS reflect its diversified business portfolio. The company generates close to 70% of its business through pharmacy benefit management services, and this business has posted strong growth and margins in the recent quarters.

Investors looking for exposure to WBA through ETFs can invest in the Van Eck Retail ETF (RTH). WBA makes up 4.5% of RTH.

Read the next section to know about WBA’s YTD stock market performance.


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