Yahoo Finance Walgreens Boots (WBA) Gains From New Alliances Amid Macro Woes
Walgreens Boots’ WBA various strategic partnerships are expected to benefit the company over the long run. Yet, a fluctuating weak U.S. macroeconomic environment might hamper the company’s margin. The stock carries a Zacks Rank #3 (Hold).
Over the past year, Walgreens Boots has outperformed the industry. The stock has lost 29.8% compared with the industry’s 30.1% decline.
Walgreens Boots exited second-quarter fiscal 2023 with better-than-expected earnings and revenues. The company’s U.S. Healthcare business expanded, led by key contract wins, continued partnership growth and a strong focus on execution.
The company continues to play a leading role in COVID-19 vaccinations and testing, having administered 2.4 million vaccinations in the reported quarter. It reinstated its 2023 earnings per share guidance, reflecting continued growth momentum.
The intensifying competition in the U.S. pharmacy retail drugstore market has compelled Walgreens Boots to diversify its product offerings through new partnerships.
In April 2023, Walgreens entered into a partnership with Dublin-based biotech company, Prothena Corporation. The collaboration aims to accelerate patient identification and recruitment for Prothena’s ongoing ASCENT-2 multiple ascending dose clinical trial.
Walgreens Boots Alliance, Inc. Price
Walgreens Boots Alliance, Inc. price | Walgreens Boots Alliance, Inc. Quote
The same month, the U.S. Healthcare segment of Walgreens and VillageMD announced the expansion of Village Medical at Walgreens into Colorado, with three new primary care practices, two in Fort Collins and a third in Longmont. In March 2023, Walgreens, in partnership with DoorDash and Uber, announced free, same-day Rx delivery of medications for the prevention and treatment of HIV.
On the flip side, during the second quarter of fiscal 2023, Pharmacy sales were affected by a 3.5% headwind from AllianceRx Walgreens. The International segment was also impacted by an adverse currency impact of 7.5% in the second quarter.
Moreover, in the last few years, a slowdown in generic introduction has been affecting Walgreens Boots’ margins. In addition, of late, increased reimbursement pressure and generic drug cost inflation have been hampering Walgreens’ margin significantly.
In the second quarter of fiscal 2023, gross profit fell 8.5% year over year. Gross margin contracted 260 bps to 20.2%. Selling, general and administrative expenses were up 5.6%.
Added to this, Walgreens Boots faces headwinds in the form of increased competition and tough industry conditions. Even though the company continues to grab market share from other traditional drugstore retailers, major mass merchants such as Target and Wal-Mart are expanding their pharmacy businesses and enjoying a fair market share. Notably, the retail wing of CVS Caremark witnessed a record market share gain following the termination of the Walgreens-Express Scripts contract.
Key Picks
Some better-ranked stocks in the overall healthcare sector are Haemonetics HAE, Lantheus LNTH and Neuronetics STIM. While Penumbra and Lantheus each sport a Zacks Rank #1 (Strong Buy), Neuronetics carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Haemonetics’ stock has risen 34.7% in the past year. The Zacks Consensus Estimate for Haemonetics’ earnings per share (EPS) has increased from $3.29 to $3.55 for 2023 and from $3.84 to $3.96 for 2024 in the past 30 days.
HAE’s earnings beat estimates in each of the trailing four quarters, the average surprise being 12.21%. In the last reported quarter, the company registered an earnings surprise of 13.24%.
The Zacks Consensus Estimate for Lantheus’ 2023 EPS has increased from $4.98 to $5.60 in the past 30 days. Shares of the company have improved 25.7% in the past year against the industry’s 33.8% decline.
LNTH’s earnings beat estimates in each of the trailing four quarters, the average surprise being 25.77%. In the last reported quarter, the company recorded an earnings surprise of 13.95%.
Estimates for Neuronetics’ loss per share have narrowed from $1.32 to $1.29 for 2023 in the past 30 days. Shares of the company have risen 1.1% in the past year compared with the industry’s 3.2% fall.
STIM’s earnings beat estimates in each of the trailing four quarters, the average surprise being 19.61%. In the last reported quarter, Neuronetics delivered an earnings surprise of 2.56%.
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