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Category: Stock Market and Walgreens Boots Alliance
Date: 10 July 2020 Stock Price of Walgreen Boots Alliance: $39.01 We take a look at the 3rd 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. While sales increased by 0.11% compared to a year ago, the group did make a loss of -$1.7 billion for the quarter as Covid-19 bites.
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Executive Vice Chairman and CEO Stefano Pessina - Prior to the pandemic our financial performance for fiscal 2020 was on track with our expectations. However, this unprecedented global crisis led to a loss in the quarter as stay-at-home orders affected all of our markets."
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 3rd quarter 2020 earnings report
- Net sales: $34.631 billion (up from $34.591 billion for the same quarter of the previous year)
- Net sales increased by 0.12% over the last 12 months
- Cost of sales: $28.193 billion (up from $27.138 billion for the same quarter of the previous year)
- Cost of sales increased by 3.9% over the last 12 months
- Net loss: -$1.708 billion (down from $1.025 billion for the same quarter of the previous year)
- Diluted loss per share: -$1.95 (down from $1.13 for the same quarter of the previous year)
- PE ratio of Walgreens Boots Alliance : No PE can be calculate since the company is currently loss making
- Dividend declared: $0.4675
- Dividend yield: 4.8%
- Diluted weighted-average shares outstanding: 875.4 million (down from 911.2 million for the same quarter of the previous year)
- Cash and cash equivalents: $768 million
- Cash and cash equivalents per share: $0.88
- Cash and cash equivalents makes up 2.25% of Walgreens Boots Alliance market capital
- Cash and cash equivalents makes up 0.89% of Walgreens Boots Alliance total assets
- Accounts receivable: $6.982 billion
- Accounts receivable makes up 8.1% of Walgreens Boots Alliance total assets
- Inventories: $9.563 billion
- Inventories makes up 11.1% of Walgreens Boots Alliances total assets
- Stockholders equity of Walgreens Boots Alliance: $21.323 billion
- Stockholders equity per share for Walgreens Boots Alliance : $24.35
- So Walgreens Boots Alliance is trading at 1.60 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.
- Stockholders equity per share for Walgreens Boots Alliance : $24.35
- Cash provided by operating activities: $3.398 billion
- Cash provided by operating activities per share: $3.88
Walgreens Boots Alliance management commentary on their 3rd quarter 2020 earnings
DEERFIELD, Ill.--(BUSINESS WIRE)-- Walgreens Boots Alliance, Inc. (Nasdaq: WBA) today announced financial results for the third quarter of fiscal 2020, which ended May 31, 2020.
Executive Vice Chairman and CEO Stefano Pessina said, “Prior to the pandemic our financial performance for fiscal 2020 was on track with our expectations. However, this unprecedented global crisis led to a loss in the quarter as stay-at-home orders affected all of our markets. I'm very proud of how all of our teams mobilized and adapted to deliver essential services in our communities across the world. Shopping patterns are evolving more rapidly than ever as consumers further embrace digital options, spurring us to accelerate our ongoing investments in digital transformation and neighborhood health destinations. This includes our two recent announcements: a significant expansion of our primary care clinics collaboration with VillageMD, and our strategic partnership with Microsoft and Adobe to launch a personalized omnichannel healthcare and shopping experience.”
Executive Vice Chairman and CEO Stefano Pessina said, “Prior to the pandemic our financial performance for fiscal 2020 was on track with our expectations. However, this unprecedented global crisis led to a loss in the quarter as stay-at-home orders affected all of our markets. I'm very proud of how all of our teams mobilized and adapted to deliver essential services in our communities across the world. Shopping patterns are evolving more rapidly than ever as consumers further embrace digital options, spurring us to accelerate our ongoing investments in digital transformation and neighborhood health destinations. This includes our two recent announcements: a significant expansion of our primary care clinics collaboration with VillageMD, and our strategic partnership with Microsoft and Adobe to launch a personalized omnichannel healthcare and shopping experience.”
Estimated COVID-19 Impact on WBA
The adverse impact of COVID-19 on sales in the quarter was approximately $700 million to $750 million, with the majority of the impact related to the Retail Pharmacy International division. This reflected a dramatic reduction in footfall in Boots UK stores - down 85 percent in April - as consumers were advised to leave home only for food and medicine. While most Boots stores remained open throughout the UK lockdown to provide communities with pharmacy and essential healthcare, our largest premium beauty and fragrance counters were effectively closed. More than 100 stores, mainly in high street, station and airport locations, were temporarily closed as were nearly all of the 600 Boots Opticians stores.
Globally, pharmacy volume was impacted by a drop in doctor visits and hospital patient admissions.
Additionally, gross margin was adversely impacted by sales mix, with a shift from higher margin discretionary categories to lower margin categories, and by higher supply chain costs. The company took measures to keep stores open during COVID-19, incurring incremental selling, general and administrative expenses (SG&A), including higher employee costs and store expenses related to social distancing and incremental cleaning.
As a result of these impacts, operating and adjusted operating income included an adverse impact of $700 million to $750 million, or $0.61 to $0.65 per share, excluding impairment charges. Furthermore, considering the third quarter operating loss in Boots UK and ongoing uncertainty due to COVID-19, the company reevaluated goodwill and intangibles in Boots UK, resulting in non-cash impairment charges of $2 billion.
Company Outlook
The company introduced fiscal 2020 adjusted EPS guidance of $4.65 to $4.75, including estimated adverse COVID-19 impacts of $1.03 to $1.14 per share. This guidance assumes continued adverse impacts from COVID-19 in the fourth quarter. In the UK, retail conditions are expected to remain very depressed, despite gradual easing of restrictions. More robust sales growth is expected in the Retail Pharmacy USA division, although retail margins are expected to remain compressed in comparison to fiscal 2019. This guidance is based on sales trends the company saw in the month of June and does not factor in potential changes to those trends.
Dividend Increase and Share Repurchase Program Update
On July 8, 2020 the WBA board of directors declared a quarterly dividend of 46.75 cents per share, an increase of 2.2 percent. The increased dividend is payable September 11, 2020 to stockholders of record as of August 19, 2020, and raises the annual rate from $1.83 per share to $1.87 per share. This marks the 45th consecutive year that WBA and its predecessor company, Walgreen Co., have raised the dividend, and the 87th year a dividend has been paid.
The company also announced that it was suspending activity under its share repurchase program.
The adverse impact of COVID-19 on sales in the quarter was approximately $700 million to $750 million, with the majority of the impact related to the Retail Pharmacy International division. This reflected a dramatic reduction in footfall in Boots UK stores - down 85 percent in April - as consumers were advised to leave home only for food and medicine. While most Boots stores remained open throughout the UK lockdown to provide communities with pharmacy and essential healthcare, our largest premium beauty and fragrance counters were effectively closed. More than 100 stores, mainly in high street, station and airport locations, were temporarily closed as were nearly all of the 600 Boots Opticians stores.
Globally, pharmacy volume was impacted by a drop in doctor visits and hospital patient admissions.
Additionally, gross margin was adversely impacted by sales mix, with a shift from higher margin discretionary categories to lower margin categories, and by higher supply chain costs. The company took measures to keep stores open during COVID-19, incurring incremental selling, general and administrative expenses (SG&A), including higher employee costs and store expenses related to social distancing and incremental cleaning.
As a result of these impacts, operating and adjusted operating income included an adverse impact of $700 million to $750 million, or $0.61 to $0.65 per share, excluding impairment charges. Furthermore, considering the third quarter operating loss in Boots UK and ongoing uncertainty due to COVID-19, the company reevaluated goodwill and intangibles in Boots UK, resulting in non-cash impairment charges of $2 billion.
Company Outlook
The company introduced fiscal 2020 adjusted EPS guidance of $4.65 to $4.75, including estimated adverse COVID-19 impacts of $1.03 to $1.14 per share. This guidance assumes continued adverse impacts from COVID-19 in the fourth quarter. In the UK, retail conditions are expected to remain very depressed, despite gradual easing of restrictions. More robust sales growth is expected in the Retail Pharmacy USA division, although retail margins are expected to remain compressed in comparison to fiscal 2019. This guidance is based on sales trends the company saw in the month of June and does not factor in potential changes to those trends.
Dividend Increase and Share Repurchase Program Update
On July 8, 2020 the WBA board of directors declared a quarterly dividend of 46.75 cents per share, an increase of 2.2 percent. The increased dividend is payable September 11, 2020 to stockholders of record as of August 19, 2020, and raises the annual rate from $1.83 per share to $1.87 per share. This marks the 45th consecutive year that WBA and its predecessor company, Walgreen Co., have raised the dividend, and the 87th year a dividend has been paid.
The company also announced that it was suspending activity under its share repurchase program.
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 -5.6% 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 Walgreen Boost as obtained from Barrons.com
Walgreens Boots Alliance earnings landed like a gut punch Thursday morning, the first blow in what could be a rocky earnings season for some health-care stocks. The drugstore conglomerate said early Thursday that the Covid-19 crisis had hurt sales by up to $750 million in the third quarter of its fiscal year. The company said it had furloughed more than 16,000 employees in the U.K. and that it planned to eliminate 4,000 positions in its Boots chain there. “Oof,” wrote Evercore ISI analyst Elizabeth Anderson in a note out Wednesday. Despite the cuts, the company increased its quarterly dividend by 2.2%, to 46.75 cents a share.
Read the full article here
Walgreens Boots Alliance earnings landed like a gut punch Thursday morning, the first blow in what could be a rocky earnings season for some health-care stocks. The drugstore conglomerate said early Thursday that the Covid-19 crisis had hurt sales by up to $750 million in the third quarter of its fiscal year. The company said it had furloughed more than 16,000 employees in the U.K. and that it planned to eliminate 4,000 positions in its Boots chain there. “Oof,” wrote Evercore ISI analyst Elizabeth Anderson in a note out Wednesday. Despite the cuts, the company increased its quarterly dividend by 2.2%, to 46.75 cents a share.
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 3rd quarter 2020 earnings report? Based on their earnings report provided our valuation models provide a target price (full value price) for Walgreens Boots Alliance of $61.40 a stock. We therefore believe that the stock of Walgreens Boots Alliance is undervalued.
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 $61.40. So we believe a good entry point into Walgreens Boots Alliance stock would be at $55.30 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 $61.40. So we believe a good entry point into Walgreens Boots Alliance stock would be at $55.30 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 4th quarter 2020 earnings report in early October 2020