Walgreens’s stock this year
Walgreens Boots Alliance (WBA) stock has been in the red almost throughout the whole year so far. Interestingly, the pharmacy giant’s stock performance hasn’t been driven by its own financial performance, but by Amazon’s expansion plans in the pharma space.
Discussing results through the year
Walgreens has reported quarterly results for the first three fiscal quarters of 2018 this year. The company outdid Wall Street’s top-line and bottom-line expectations during all three quarters. Consolidates sales and margins remained healthy though the company’s US retail business has remained under pressure due to reimbursement pressures and generic deflation. Same-store sales for this business have declined for eight straight quarters, which has also raised doubts about Walgreens’s acquisition of 1,932 Rite Aid (RAD) stores.
The company raised its fiscal 2018 EPS guidance in each of the three quarters. It has generated $4.4 billion in free cash flow year-to-date.
Understanding Walgreens’s stock performance
Walgreens’s stock market performance this year has primarily been driven by two events related to Amazon (AMZN). The first one came on January 30 when Amazon announced its intention to form a non-profit healthcare venture with Berkshire Hathaway and J.P. Morgan Chase with the aim of lowering healthcare costs for employees of the three companies. The announcement led to an immediate 5.2% drop in Walgreens stock price. Plus, the stock fell more than 16% over the next one month and 29% over the next four months. Then in June, Amazon announced its acquisition of online prescription filler PillPack. As discussed, the stock crashed a massive 9.9% after the news on June 28.
However, it is interesting to note that Walgreens stock has rallied 11% as of August 8 since the June 28 plunge. Maybe the Amazon scare is fading away. The company is now sitting at a YTD (year-to-date) loss of 8.4% versus a 6% YTD decline in CVS Health (CVS) stock.
Nevertheless, Wall Street has turned bearish on Walgreens, and the company has faced a series of downgrades over the last one and a half months, which we’ll discuss in the next part of this series.