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Why Investors Really Liked Walgreens Boots Alliance's Q2 Update

By Keith Speights - Mar 31, 2021 at 10:10AM

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The pharmacy giant beat earnings estimates and raised its fiscal 2021 guidance.

Walgreens Boots Alliance (WBA 0.86%) got hit hard by the COVID-19 pandemic last year, with its shares sinking 32%. However, the pharmacy giant is off to a great start in 2021. And the year is getting even better.

The company announced its fiscal 2021 second-quarter results before the market opened on Wednesday. The healthcare stock rose more than 5% in early trading. Here are the highlights from Walgreens' Q2 update.

Pharmacist speaking with client at counter.

Image source: Getty Images.

By the numbers

Walgreens reported revenue of $32.8 billion in the second quarter, up 4.6% year over year excluding discontinued operations. This result was lower than the average analysts' revenue estimate of $35.5 billion.

The company announced fiscal 2021 Q2 net income of $1 billion, or $1.19 per share, based on generally accepted accounting principles (GAAP). In the prior-year period, Walgreens generated GAAP earnings of $946 million, or $1.07 per share.

Walgreens recorded adjusted net income in the second quarter of $1.2 billion, or $1.40 per share. This result was down from adjusted earnings of $1.3 billion, or $1.52 per share, in the prior-year period. However, it easily beat the consensus analysts estimate of $1.11 per share.

Behind the numbers

The pharmacy giant's fiscal Q2 results received some help from currency fluctuations. On a constant-currency basis, Walgreens' year-over-year revenue and earnings growth would have been below its reported numbers.

Walgreens' international segment sales jumped 32.6% year over year to $5.4 billion. This growth stemmed entirely from the company's new joint venture in Germany. Without this joint venture, international sales would have fallen 9.9% on a constant-currency basis due primarily to the negative impact of COVID-19.

United States segment sales rose only 0.4% year over year to $27.3 billion in the second quarter. Walgreens' store optimization programs weighed on growth. There was also an extra day of sales in the prior-year period because 2020 was a leap year. In addition, an unusually weak cough, cold, and flu season, along with fewer doctor visits, caused prescriptions filled in Q2 to decline 1.1%.

On a brighter note, though, Walgreens announced that its digitally initiated retail sales soared 78% year over year.

Looking ahead

Probably the best news of all from Walgreens' Q2 update was its outlook for fiscal year 2021. The company raised its adjusted earnings per share (EPS) guidance for the year to mid- to high-single-digit growth. Walgreens previously projected low single-digit adjusted EPS growth. It looks for stronger growth in the second half of fiscal 2021.

The pharmacy company said that its divestiture of Alliance Healthcare remains on track to close before the end of the fiscal year. Walgreens will pocket around $6.5 billion from this sale.

Overall, Walgreens' Q2 update appears to be reassuring for shareholders who love the company's dividend. With its prospects looking brighter and a big influx of cash on the way, Walgreens seems to be in good shape to keep its track record of 45 years of consecutive dividend increases going.

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Walgreens Boots Alliance, Inc. Stock Quote
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