Jan 7, 2016 12:53 PM

Walgreens beats 1Q profit forecasts, narrows 2016 forecast

The Associated Press

Walgreens trumped Wall Street earnings expectation for its fiscal first quarter, and the nation's largest drugstore chain started 2016 cautiously by narrowing its forecast for the new year.

The Deerfield, Illinois, company said Thursday that it hiked the bottom end of a forecast it laid out in October by 5 cents per share. It now expects full-year earnings to range from $4.30 to $4.55 per share.

Analysts expect, on average, earnings of $4.44 per share for fiscal 2016, according to FactSet.

Walgreens earned $1.11 billion in the quarter that ended Nov. 30, with adjusted results totaling $1.03 per share.

Analysts expected, on average, earnings of 97 cents per share, according to Zacks Investment Research.

The company posted revenue of $29.03 billion in the period, which missed analyst expectations for $29.56 billion.

In October, Walgreens also said it will spend $9.41 billion to take over rival drugstore chain Rite Aid in a deal that could create a drugstore chain with more than 12,700 U.S. locations, far more than the nearest competitor, CVS Health Corp.

Walgreens said Thursday it still expects the deal to close in the second half of this year. Last month, the Federal Trade Commission asked for more information about the acquisition, a request Walgreens said it expected.

The Rite Aid deal came less than a year after Walgreens bought European health and beauty retailer Alliance Boots, which runs the largest pharmacy chain in the United Kingdom. That deal closed at the end of 2014, which alters year-over-year comparisons of Walgreens financial results for its fiscal first quarter.

Walgreens CEO Stefano Pessina told analysts Thursday morning that his company is interested in making more moves, even though it is still working on or digesting these deals. In particular, Walgreens would like to return to the pharmacy benefits management business, which involves running prescription drug coverage for big customers like employers and insurers. Pessina said that could happen through a merger, partnership or promotional agreement.

Walgreens runs more than 13,000 drugstores in 11 countries, including around 8,100 in the United States, where it also operates Duane Reade locations. Sales from established locations in the U.S. climbed 5.8 percent compared to a year ago.

Revenue from established stores is considered a key indicator of a retailer's health, because it excludes the impact from recently opened or closed stores.

Walgreens faces challenges like a slight drop in sales from store areas outside its pharmacies. But Credit Suisse analyst Edward J. Kelly said the company's fiscal year is off to a solid start, and gains from the Rite Aid deal and other potential transactions should help its stock.

Shares of Walgreens Boots Alliance Inc. climbed nearly 3 percent, or $2.35, to $81.98 Thursday afternoon, while broader trading indexes fell more than 1 percent.

The company's stock advanced about 12 percent last year.


Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on WBA at http://www.zacks.com/ap/WBA


Keywords: Walgreens Boots Alliance, Earnings Report


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