Yahoo Finance Walgreens' (WBA) New Partnerships Aid, Margin Pressure Ails
Walgreens Boots’ WBA various strategic partnerships are expected to benefit the company over the long run. However, the prevailing tough macroeconomic environment might hamper the company’s margin. The stock carries a Zacks Rank #3 (Hold).
Walgreens exited first-quarter fiscal 2023 with better-than-expected earnings and revenues. The company’s U.S. Healthcare business grew, led by key contract wins, continued partnership growth and a strong focus on execution. The company achieved the calendar year 2022 target for co-located VillageMD clinics of 200.
The company continues to play a leading role in COVID-19 vaccinations and testing, administering 8.4 million vaccinations in the reported quarter. Walgreens raised its U.S. Healthcare target in November, including the fiscal 2025 sales goal to $14.5-$16.0 billion, up from $11.0-$12.0 billion previously. Moreover, the company has raised its 2023 sales guidance, reflecting continued growth momentum.
During the first-quarter fiscal 2023 earnings update, Walgreens noted that it has launched 24-hour same-day delivery, offering the widest range of retail items for around-the-clock delivery across the country. This adds to the company’s broad range of channel access, including one-hour delivery and 30-minute pickup.
In June 2022, Walgreens launched its clinical trial business to redefine the patient experience and bolster access and retention in sponsor-led drug development research. In March 2022, the company, in collaboration with Laboratory Corporation of America Holdings, announced the nationwide availability of “Pixel by LabCorp COVID-19 at-home collection kit” at no cost to individuals who meet clinical guidelines.
In terms of new partnerships, in November 2022, VillageMD entered into a definitive agreement to acquire Summit Health-CityMD — a leading provider of primary, specialty and urgent care.
Walgreens Boots Alliance, Inc. Price
Walgreens Boots Alliance, Inc. price | Walgreens Boots Alliance, Inc. Quote
In October 2022, Walgreens announced the acceleration of its plans to acquire full ownership of CareCentrix, expanding its reach into the growing homecare sector and advancing its healthcare long-term growth strategy.
On the flip side, over the past year, Walgreens has underperformed the industry. The stock has lost 32.6% compared with the industry’s 19.1% decline.
During the first quarter of fiscal 2023, Walgreens’ Pharmacy sales decreased 4.2% compared with the year-ago quarter, negatively impacted by a 7.8% point headwind from AllianceRx Walgreens. Comparable pharmacy sales declined 0.9%, reflecting lower demand for COVID-19 services. The International segment declined year over year due to an adverse currency impact of 15.4%.
In the last few years, the slowdown in the generic introduction has been affecting Walgreens’ margins. In addition, increased reimbursement pressure and generic drug cost inflation have been hampering its margin on a significant level. In the first quarter of fiscal 2023, Gross profit fell 8.2% year over year. Gross margin contracted 152 basis points to 20.8%. Selling, general and administrative expenses were up 105.9%. The company reported an adjusted operating loss of $6.2 million for the quarter under review compared to $1.3 million of operating profit in the year-ago period.
Key Picks
Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. AMN, Cardinal Health, Inc. CAH and Merit Medical Systems, Inc. MMSI.
AMN Healthcare, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 3.3%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 10.9%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMN Healthcare has gained 5.4% against the industry’s 19.6% decline in the past year.
Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average beat being 6.4%.
Cardinal Health has gained 48.7% against the industry’s 0.8% decline over the past year.
Merit Medical, flaunting a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 25.4%.
Merit Medical has gained 28.1% against the industry’s 0.8% decline over the past year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Cardinal Health, Inc. (CAH) : Free Stock Analysis Report
Merit Medical Systems, Inc. (MMSI) : Free Stock Analysis Report
AMN Healthcare Services Inc (AMN) : Free Stock Analysis Report
Walgreens Boots Alliance, Inc. (WBA) : Free Stock Analysis Report
