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Why Walgreens Boots Alliance Stock Plunged Today

By Steve Symington – Apr 2, 2019 at 1:39PM

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The pharmacy chain is stumbling after a difficult quarter. Here's what investors need to know.

What happened

Shares of Walgreens Boots Alliance (WBA -1.50%) were down 12.1% as of 1:00 p.m. EDT Tuesday after the drugstore chain announced disappointing results for its fiscal 2019 second quarter. 

More specifically, Walgreens' quarterly revenue climbed 4.6% year over year to $34.5 billion, while adjusted earnings per share declined 5.4% to $1.64. Analysts, on average, had been modeling higher earnings of $1.74 per share on revenue of $34.6 billion.

Yellow stock market chart indicating losses with a black and white background

IMAGE SOURCE: GETTY IMAGES

So what

Walgreens Executive Vice Chairman and CEO Stefano Pessina blamed an acceleration in "market challenges and macro trends" for the underwhelming performance, calling it "the most difficult quarter we have had since the formation of Walgreens Boots Alliance."

"[W]e saw significant reimbursement pressure, compounded by lower generic deflation, as well as continued consumer market challenges in the U.S. and [U.K.]," he added. "While we had begun initiatives to address these trends, our response was not rapid enough given market conditions, resulting in a disappointing quarter that did not meet our expectations."

Now what

Still, Walgreens pledged to accelerate its existing cost-reduction and business-transformation initiatives, and boosted its annual cost savings goal by $500 million, to $1.5 billion by fiscal 2022.

In the meantime, management said it expects adjusted earnings per share this fiscal year to be roughly flat at constant currencies, down from the previous guidance for growth of 7% to 12%. Looking further ahead as strategic initiatives begin to take hold, they believe the company should be able to achieve "improved performance" starting in fiscal 2020, before returning to mid- to high-single-digit adjusted EPS growth after that.

But while patient investors can take solace in knowing that the company's long-term goals remain intact, this report offered little incentive for short-term traders to stick around. Walgreens' stock price is responding accordingly.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Walgreens Boots Alliance Stock Quote
Walgreens Boots Alliance
WBA
$40.59 (-1.50%) $0.62

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