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Category: Stock Market and Walgreens Boots Alliance
Date: 3 April 2020 Stock Price: $40.31 We take a look at the 2nd quarter earnings report of their 2020 fiscal year of Walgreen Boots Alliance a retail and wholesale pharmacy group that employs more than 440 000 people and operates over 18 700 stores.
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About Walgreen Boots Alliance
Walgreens Boots Alliance (Nasdaq: WBA) is a global leader in retail and wholesale pharmacy, touching millions of lives every day through dispensing and distributing medicines, its convenient retail locations, digital platforms and health and beauty products. The company has more than 100 years of trusted health care heritage and innovation in community pharmacy and pharmaceutical wholesaling. Including equity method investments, WBA has a presence in more than 25 countries, employs more than 440,000 people and has more than 18,750 stores.
Overview of Walgreens 2nd quarter 2020 earnings report
- Net sales: $35.820 billion (up from $34.528 billion for the same quarter of the previous year)
- Net sales increased by 3.7% over the last 12 months
- Cost of sales: $28.307 billion (up from $26.773 billion for the same quarter of the previous year)
- Cost of sales increased by 5.7% over the last 12 months
- Net earnings: $952 million (down from $1.138 billion for the same quarter of the previous year)
- Diluted earnings per share: $1.07 (down from $1.24 for the same quarter of the previous year)
- PE ratio of Walgreens Boots Alliance : 37.7
- Dividend declared: $0.4575
- Dividend yield: 4.5%
- Diluted weighted-average shares outstanding: 885.5 million (down from 930.7 million for the same quarter of the previous year)
- Cash and cash equivalents: $792 million
- Cash and cash equivalents per share: $0.89
- Cash and cash equivalents makes up 2.21% of Walgreens Boots Alliance market capital
- Cash and cash equivalents makes up 4.18% of Walgreens Boots Alliance total assets
- Accounts receivable: $7.572 billion
- Accounts receivable makes up 40.4% of Walgreens Boots Alliance total assets
- Inventories: $9.652 billion
- Inventories makes up 51.04% of Walgreens Boots Alliances total assets
- Stockholders equity of Walgreens Boots Alliance: $24.334 billion
- Stockholders equity per share for Walgreens Boots Alliance's : $27.48
- So Walgreens Boots Alliance is trading at 1.46 times it stockholders equity per share which is well outside the expected range of between 2 and 4 times most companies tend to trade at.
- To put this into context the S&P 500 firms have an average price to book value of 3.34 times. Read more about the S&P500 here.
- Cash provided by operating activities for the 6 months of the fiscal year: $2.484 billion
- Cash provided by operating activities per share for the 6 months of the fiscal year: $2.80
Walgreens Boots Alliance management commentary on their 2nd quarter 2020 earnings
DEERFIELD, Ill.--(BUSINESS WIRE)-- Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced financial results for the second quarter of fiscal 2020, which ended February 29, 2020.
Executive Vice Chairman and CEO Stefano Pessina said, “We are pleased to report second quarter results exceeding our expectations, with sequential improvement in comparable U.S. prescription volume and retail sales. During these unprecedented times of global uncertainty, Walgreens Boots Alliance is on the front lines of combating the COVID-19 pandemic. Our number one priority is to continue to provide essential services, products and information at this critical moment of need, demonstrating our unwavering commitment to our customers and patients, and to our people.”
Executive Vice Chairman and CEO Stefano Pessina said, “We are pleased to report second quarter results exceeding our expectations, with sequential improvement in comparable U.S. prescription volume and retail sales. During these unprecedented times of global uncertainty, Walgreens Boots Alliance is on the front lines of combating the COVID-19 pandemic. Our number one priority is to continue to provide essential services, products and information at this critical moment of need, demonstrating our unwavering commitment to our customers and patients, and to our people.”
“While the operating environment in most of our markets during the fiscal third quarter was favorable, estimates on the COVID-19 pandemic’s effect on the global economy are uncertain,” Werner continued. “At this time, despite only two months remaining in our fiscal fourth quarter, we are unable to reasonably forecast frozen potato product demand because of the pandemic’s unpredictable near-term effect on restaurant traffic in North America and our key international markets. As a result, we’re withdrawing our financial outlook for the remainder of our fiscal year.”
“During these uncertain times, our top priorities are to ensure the health and welfare of our employees, maintain product safety, and continue to support our customers as they work to manage their supply chains and inventories. While the near-term impact of the COVID-19 pandemic on consumer demand and sales volume is likely to be material, we believe we have sufficient liquidity to manage through the uncertainty, and we remain confident in the long-term outlook for our customers and the continued growth of the global category.”
Cash Flow
Through the third quarter of fiscal 2020, net cash from operating activities declined $8.7 million to $435.7 million, primarily due to increased working capital requirements. Capital expenditures, including information technology expenditures, were $152.0 million in the first three quarters of fiscal 2020, down $95.3 million versus the prior year period due to investments for the construction of a production line in Hermiston, Oregon, which was completed in the fourth quarter of fiscal 2019. At February 23, 2020, the Company had no borrowings on its revolving credit facility. During the latter part of March 2020, the Company borrowed $495 million on its revolving credit facility to increase its cash position as a precautionary measure in order to preserve financial flexibility considering the uncertainty in the global markets resulting from the COVID-19 pandemic.
Capital Returned to Shareholders
In the first three quarters of fiscal 2020, the Company returned a total of $110.6 million to shareholders, including $87.7 million in cash dividends and $22.9 million through share repurchases. The average price per share repurchased was $79.56. The Company has approximately $195.3 million remaining under its current $250 million share repurchase authorization. Given the uncertainty of the COVID-19 pandemic’s impact, the Company has temporarily suspended share repurchases to provide additional liquidity until there is more clarity about the future operating environment.
Outlook
The Company has withdrawn its financial outlook for fiscal year 2020 for net sales growth and for Adjusted EBITDA including unconsolidated joint ventures(1). At this time, the Company does not believe it can reasonably forecast frozen potato product demand in the near term due to the unpredictable near-term effect of the COVID-19 pandemic on the global economy, and more specifically, on restaurant traffic in North America and key international markets, including markets served by the Company’s joint ventures.
The Company’s previous outlook included the contribution of a 53rd week in the fiscal 2020 period, with the additional week falling in the fourth quarter.
The Company continues to expect for fiscal 2020:
Dividends Declared
During the second quarter, the company declared a quarterly dividend of 45.75 cents per share, unchanged from the previous quarter and an increase of 4 percent from the year-ago quarter. The dividend was payable March 12, 2020 to stockholders of record as of February 19, 2020.
“During these uncertain times, our top priorities are to ensure the health and welfare of our employees, maintain product safety, and continue to support our customers as they work to manage their supply chains and inventories. While the near-term impact of the COVID-19 pandemic on consumer demand and sales volume is likely to be material, we believe we have sufficient liquidity to manage through the uncertainty, and we remain confident in the long-term outlook for our customers and the continued growth of the global category.”
Cash Flow
Through the third quarter of fiscal 2020, net cash from operating activities declined $8.7 million to $435.7 million, primarily due to increased working capital requirements. Capital expenditures, including information technology expenditures, were $152.0 million in the first three quarters of fiscal 2020, down $95.3 million versus the prior year period due to investments for the construction of a production line in Hermiston, Oregon, which was completed in the fourth quarter of fiscal 2019. At February 23, 2020, the Company had no borrowings on its revolving credit facility. During the latter part of March 2020, the Company borrowed $495 million on its revolving credit facility to increase its cash position as a precautionary measure in order to preserve financial flexibility considering the uncertainty in the global markets resulting from the COVID-19 pandemic.
Capital Returned to Shareholders
In the first three quarters of fiscal 2020, the Company returned a total of $110.6 million to shareholders, including $87.7 million in cash dividends and $22.9 million through share repurchases. The average price per share repurchased was $79.56. The Company has approximately $195.3 million remaining under its current $250 million share repurchase authorization. Given the uncertainty of the COVID-19 pandemic’s impact, the Company has temporarily suspended share repurchases to provide additional liquidity until there is more clarity about the future operating environment.
Outlook
The Company has withdrawn its financial outlook for fiscal year 2020 for net sales growth and for Adjusted EBITDA including unconsolidated joint ventures(1). At this time, the Company does not believe it can reasonably forecast frozen potato product demand in the near term due to the unpredictable near-term effect of the COVID-19 pandemic on the global economy, and more specifically, on restaurant traffic in North America and key international markets, including markets served by the Company’s joint ventures.
The Company’s previous outlook included the contribution of a 53rd week in the fiscal 2020 period, with the additional week falling in the fourth quarter.
The Company continues to expect for fiscal 2020:
- Interest expense of approximately $110 million;
- An effective tax rate(2) excluding comparability items of approximately 24 percent; and
- Depreciation and amortization of approximately $175 million.
Dividends Declared
During the second quarter, the company declared a quarterly dividend of 45.75 cents per share, unchanged from the previous quarter and an increase of 4 percent from the year-ago quarter. The dividend was payable March 12, 2020 to stockholders of record as of February 19, 2020.
Walgreens (NYSE: WBA) stock price history
The image below, obtained from Google, shows the stock price history of Walgreens Boots Alliance (NASDAQ: WBA) over the last 5 years. And it's not been good time for Walgreens stockholders. 5 years ago the stock was trading at $92 a stock and it is currently trading at $40.31 a stock. That is a significant loss of -179.3% suffered by Walgreens Alliance stockholders over the last 5 years.
The stock of Walgreens is trading at closer to its 52 week low of $39.40than it is to its 52 week low of $58.83 which to us is a clear indication that the momentum and sentiment towards Lamb Weston's stock is very negative right now, as is the case with most stocks around the world considering the significant market sell offs that has been set on by the impact of the Coronavirus on global economic growth. Read more about the stock market sell off here
The stock of Walgreens is trading at closer to its 52 week low of $39.40than it is to its 52 week low of $58.83 which to us is a clear indication that the momentum and sentiment towards Lamb Weston's stock is very negative right now, as is the case with most stocks around the world considering the significant market sell offs that has been set on by the impact of the Coronavirus on global economic growth. Read more about the stock market sell off here
Recent coverage of Walgreens Boots Alliance
The extract below shows the latest coverage of Lamb Weston as obtained from The Motley Fool (Fool.com)
What happened
Shares of Walgreens Boots Alliance (NASDAQ:WBA), CVS Health (NYSE:CVS), and Rite Aid (NYSE:RAD) all tumbled on Thursday. Each of these companies' stocks was down at least 7% in early-morning trading. As of 12:40 p.m. EDT, their stocks were down 7%, 4%, and 13%, respectively.
So what
All three of these stocks appear to be selling off in response to Walgreens' earnings report for the second quarter of fiscal 2020, which was released this morning.
Here are the key headline numbers for investors to know:
Read the full article here
What happened
Shares of Walgreens Boots Alliance (NASDAQ:WBA), CVS Health (NYSE:CVS), and Rite Aid (NYSE:RAD) all tumbled on Thursday. Each of these companies' stocks was down at least 7% in early-morning trading. As of 12:40 p.m. EDT, their stocks were down 7%, 4%, and 13%, respectively.
So what
All three of these stocks appear to be selling off in response to Walgreens' earnings report for the second quarter of fiscal 2020, which was released this morning.
Here are the key headline numbers for investors to know:
- Sales grew by 3.7% to $35.8 billion. That was ahead of the $35.3 billion analysts had predicted.
- Operating income fell 18.7% to $1.2 billion. On a non-GAAP (adjusted) basis, operating income fell 12% to $1.7 billion.
- EPS fell 14% to $1.07. Adjusted EPS fell 7% to $1.52. That was ahead of the $1.46 Wall Street was expecting.
Read the full article here
Walgreens Boots Alliance (NASDAQ: WBA) latest stock valuation
So what is Walgreens Boots Alliance (NASDAQ: WBA) stock worth based on the release of their 2nd quarter 20202 earnings report? Based on their earnings report provided our valuation models provide a target (full value) price for Walgreens Boots Alliance of $64.50 a stock. We therefore believe that the stock of Walgreens Boots Alliance is under valued.
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $64.80. So we believe a good entry point into Walgreens Boots Alliance stock would be at $58.10 or below.
Since the stock of Walgreens Boots Alliance is trading at well below our recommended entry point we believe the current sell off in world markets due to the Coronavirus has provided a great opportunity to by Walgreens Boots Alliance stock at a depressed price. We therefore rate Walgreens Boots Alliance as a buy
We usually suggest long term investors look to enter a stock at least 10% below our target (full value) price which in this case is $64.80. So we believe a good entry point into Walgreens Boots Alliance stock would be at $58.10 or below.
Since the stock of Walgreens Boots Alliance is trading at well below our recommended entry point we believe the current sell off in world markets due to the Coronavirus has provided a great opportunity to by Walgreens Boots Alliance stock at a depressed price. We therefore rate Walgreens Boots Alliance as a buy
Next earnings release of Walgreens Boots Alliance
It is expected that Walgreens Boots Alliance will release their 3rd quarter 2020 earnings report in early July 2020