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Walgreens’ Weak Q2 Results Weigh on Its Stock

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Apr. 2 2019, Updated 9:48 a.m. ET

Second-quarter takeaways

Walgreens Boots Alliance (WBA) reported dismal results for the second quarter of fiscal 2019 on April 2. The company’s top and bottom lines fell short of analysts’ consensus estimates. Meanwhile, persisting pressure on the company’s earnings led its management to lower its profit forecast, following which its stock dropped more than 10% in the premarket session.

Walgreens’ top line benefited from its acquisition of Rite Aid stores. However, its net sales remained slightly lower than analysts’ estimate as currency volatility and challenging market conditions in the United Kingdom remained a drag. Weak comparable store sales in the US retail sector further pressured the company’s top line.

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In comparison, CVS Health’s (CVS) top line registered double-digit growth during its last-reported quarter driven by the addition of Aetna and growth in prescription volumes. However, CVS Health’s top line missed analysts’ expectation owing to price compression.

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Walgreens’ adjusted operating income fell 10.4% YoY (year-over-year), reflecting generics deflation and higher reimbursement pressure in the US pharmacy business. Lower-than-expected sales and margin pressures weighed on its second-quarter bottom line, which fell 5.4% YoY and missed analysts’ consensus estimate.

Key financials

Walgreens posted revenue of $35.5 billion in the second quarter of fiscal 2019, up 4.6% YoY but marginally short of Wall Street’s expectations. The company’s adjusted operating income fell 10.4% to $1.9 billion. Walgreens posted adjusted EPS of $1.64, a fall of 5.4% YoY, missing analysts’ consensus estimate of $1.72. 

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