Walgreens Boots Alliance (NASDAQ:WBA) stock badly underperformed the S&P 500 in 2019, with shares sinking nearly 14% in a year when the stock market soared. 2020 is off to an even worse start mainly due to the novel coronavirus pandemic.

The pharmacy giant announced its fiscal 2020 second-quarter results before the market opened on Thursday. While there was some good news, it wasn't enough to excite investors. Here are the highlights of Walgreens' Q2 update.

Pharmacist speaking with customer at pharmacy counter

Image source: Getty Images.

By the numbers

Walgreens Boots Alliance reported revenue in the second quarter of $35.8 billion, up 3.7% from the prior-year period and a 4.1% year-over-year increase on a constant-currency basis. The consensus among Wall Street analysts projected Q2 revenue of $35.26 billion.

The company posted second-quarter net income of $946 million, or $1.07 per share, based on generally accepted accounting principles (GAAP). This represented a decrease from net income of $1.2 billion, or $1.24 per share, in Q2 2019. 

Walgreens reported adjusted net income of $1.3 billion, or $1.52 per share. This result was down from the company's adjusted net income of $1.5 billion, or $1.64 per share, in the prior-year period. However, it was better than analysts' average estimate of $1.46 per share.

Behind the numbers

Walgreens Boots Alliance's wholesale pharmacy business provided the biggest boost to the company's total revenue in the second quarter. Wholesale pharmacy revenue jumped 5.7% year over year to $6.1 billion. Emerging markets and the United Kingdom were the segment's strongest areas in Q2.

But Walgreens' biggest revenue generator is its retail pharmacy USA segment. Sales for this business rose 3.8% over the prior-year period to $27.2 billion. Retail sales declined 0.3% from Q2 2019. However, pharmacy sales increased 5.3% year over year due to higher brand prices, increased prescription volume, and strong growth for the specialty pharmacy business.

The worst area for Walgreens in Q2 was its retail pharmacy international segment. Sales fell 0.8% from the prior-year period to $3.1 billion. This decline stemmed primarily from lower Boots UK sales and lower sales in Chile and Thailand.

It's important to note that Walgreens' second quarter ended on Feb. 29, 2020. The company said that because the effects of the COVID-19 pandemic began close to the end of its second quarter, the outbreak didn't have a material impact on its overall results.

Looking ahead

However, COVID-19 will affect Walgreens in the third quarter -- and that's why the solid Q2 results didn't give investors a warm-and-fuzzy feeling. Prior to the pandemic, Walgreens was on track to keep its guidance in place: basically flat adjusted earnings per share (EPS) growth in fiscal 2020. Although the company beat its expectations in Q2, it can't predict at this point how COVID-19 might impact its full-year guidance.

Walgreens Boots Alliance is a good example of how healthcare stocks aren't immune to the effects of the coronavirus outbreak. The company's pharmacy business should remain relatively steady since patients will need their prescription drugs, but its front-store retail business could be hit pretty hard.

The good news is that the current crisis is only a temporary one. Walgreens' long-term prospects should remain unchanged.