What To Expect From Walgreens’ Q4 2018 Earnings

by Trefis Team
Walgreens Boots Alliance
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Walgreens (NYSE:WBA) is scheduled to release its fourth quarter results on October 11. The company posted healthy growth in its third quarter driven by bulk growth across the retail pharmacy segment and the merger with Rite Aid that took place as part of a wave of health care consolidations. The company posted sales of 34.3 billion, up 14% from the prior-year quarter, with adjusted earnings per share at $1.35. Early benefits of new pharmacy contracts, as well as an increase in volume owing to previously announced pharmacy partnerships, have been driving growth in this space over the past few quarters. Rising expenditures on prescription drugs and growing demand for specialty drugs have been further strengthening the retail pharmacy market for Walgreens.

In the upcoming earnings announcement, we anticipate the company to continue to post healthy growth  driven by comparable prescription growth and benefit from strength in retail prescriptions. The company is working to gain efficiency and provide high quality, cost-effective pharmacy services in order to reduce pharmacy costs. For full year 2018 earnings, the company management has forecast it to grow between the band of $5.90 to $6.05, this includes a Trump tax cut benefit that is slightly higher than 35 cents from the upper end of its prior target. Please refer to our dashboard Expectations For Walgreens Q4 2018 Earnings.

The factors below will likely play a key role in Walgreens’ Q4 results.

Retail Pharmacy segments and Pharmaceutical Wholesale segments will continue to perform well – For Retail USA and Retail International Pharmacy segment, the company had decent revenue growth of 15% and 6.6% y-o-y, respectively, in the previous quarter primarily due to higher prescription volume including central specialty and mail following the acquisition of Rite Aid stores, and Internationally due to favorable currency translation.  The growth for this segment has continued to follow an upward trend driven by solid same store script growth as a result of partnerships established with Rite Aid. Increased participation as a pharmacy in Medicare Part D networks has also boosted results.  In the upcoming Q4, growth for this segment will follow an upward trend driven by solid same store script growth as a result of partnerships established with Rite Aid. Increased participation as a pharmacy in Medicare Part D networks will also boost results.

In its Pharmaceutical Wholesale Services segment, Walgreens grew 12.6% y-o-y in the previous quarter. Certain factors that have aided growth in this segment and are likely to favor it include network claims, brand inflation, and growth in specialty pharmacy. This segment saw strong performance in emerging markets.

Walgreens Business Will Likely Receive A Major Boost From the recent Acquisition of  Rite Aid stores and prospective deal with AmerisourceBergen – The recent acquisition of stores from Rite Aid is likely to provide a major boost to Walgreens business in 2018 and beyond. The combination is expected to provide consumers with a more integrated experience, reduced costs, and improved access to health care experts in homes. This will combine Walgreens’ dense local presence through pharmacies and Rite Aid’s health care benefits and services.

Digital platforms to aid sales growth – The company’s efforts to boost its digital capabilities have started paying off. In this regard, more than 20% of the company’s retail refill scripts were initiated through digital channels with the Walgreens’ mobile app, having been downloaded in excess of 50 million times since the launch. The growth through the digital platform should continue to aid the top line in the coming earnings and beyond, too.

All in all, we expect Walgreens to post healthy growth in the coming Q4 2018 earnings.


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