Walgreens Boots Stock Plunges After Q3 Earnings - Here's Why

Walgreens Boots Alliance Inc's WBA Q3 FY23 sales increased 8.6% Y/Y to $35.4 billion, up 8.9% on a constant currency basis, beating the consensus of $34.25 billion.

Q3 reported EPS was $0.14, a decrease of $0.20 from the year-ago quarter. Adjusted EPS increased 3.3% to $1.00, up 3.6% on a constant currency basis, reflecting a 19.5% headwind from significantly lower COVID-19 vaccine and testing volumes, missing the consensus of $1.07.

U.S. pharmacy comparable script volume growth was 2.8% excluding immunizations. The industry-wide pharmacist labor shortage was addressed by returning an incremental ~300 stores to normal pharmacy operating hours and optimizing hours at an additional ~500 stores.

U.S. retail comparable sales saw a decline of (0.2)%.

Adjusted operating income was $1.0 billion, up 0.6% on a constant currency basis, reflecting improvements in U.S. core pharmacy and International growth, partly offset by lower volumes of COVID-19 vaccinations and testing, planned payroll investments in U.S. Retail Pharmacy, and investments in U.S. Healthcare.

Related: Walgreens' Profit Drive: Employee Cuts Amid Transformation to Consumer Healthcare.

Guidance: Walgreens has lowered its FY23 adjusted EPS guidance to $4.00-$4.05 from the previous $4.45 - $4.65 (versus the consensus of $4.45) to account for consumer and category conditions, lower COVID-19 contribution, and a more cautious macroeconomic forward view.

Preliminary fiscal 2024 expectations suggest a low- to mid-single-digit adjusted operating income growth, likely to be driven by U.S. Healthcare and U.S. Retail Pharmacy.

Adjusted operating income growth is expected to outpace adjusted EPS.

The company is raising the Transformational Cost Management Program target from $3.5 billion to $4.1 billion in cumulative savings by fiscal 2024.

Price Action: WBA shares are down 7.29% at $29.29 during the premarket session on the last check Tuesday.

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