What To Expect From Walgreens Stock As It Reports Its Q1 Results?

Walgreens Boots Alliance (NYSE: WBA) is scheduled to report its fiscal Q1 2022 results on Thursday, January 6. We expect the company to likely post revenue and earnings slightly above the street expectations, primarily driven by post-pandemic recovery in all segments as well as continued Covid-19 vaccine administration with the rise in demand of booster shots. The company will also benefit from its international pharmaceuticals business, as well as expansion of its online healthcare platform (Find Care), a trend seen over the recent past, as well. We expect the company to navigate solidly in Q1 based on these factors.

There have been reports of Walgreens receiving an offer from Bain Capital for its Boots retail chain in the U.K. ^[1]. It will be interesting to see if the company’s management provides an update on this development. Now, despite Walgreens Q1 results expected to be better than the street estimates, we believe that its stock is fully valued at its current levels of $53. Our interactive dashboard analysis on Walgreens Pre-Earnings has additional details.

(1) Revenues expected to be slightly above the consensus estimates

Trefis estimates Walgreens’ Q1 2022 revenues to be around $32.9 billion, slightly above the $32.7 billion consensus estimate. Revenue growth is expected to be driven by growth in all segments, including pharmacy in the U.S. as well as international markets, retail, and pharmacy wholesale business, partly led by post-pandemic recovery. Our dashboard on Walgreens Revenue offers more details on the company’s segments. Furthermore, administration of Covid-19 vaccinations will also bolster the overall revenue growth. Walgreens is administering Covid-19 vaccines at over 8,500 locations. However, it should be noted that the vaccine administration for Walgreens peaked in fiscal Q3 2021, and the contribution is likely to be lower in Q1.

2) EPS also likely to be just above the consensus estimates

Walgreens’ Q1 2022 adjusted earnings per share (EPS) is expected to be $1.35 per Trefis analysis, compared to consensus estimate of $1.33. Walgreens’ adjusted net income of $1.0 billion in Q4 2021 reflected a 30% rise from its $0.8 billion figure in the prior-year quarter. This can be attributed to higher revenues and around 65 basis points expansion of operating margins. For the full-fiscal 2022, we expect the adjusted EPS to be $4.96, compared to $4.91 seen in 2021.

(3) Stock price estimate in-line with the current market price

Going by our Walgreens Valuation with an EPS estimate of $4.96 and a P/E multiple of 10x in 2022, this translates into a price of $52, which is near its current market price of around $53. The 10x figure compares with levels of 8x – 11x seen over the recent years. Overall, we believe that the company is likely to post good Q1 results but it may be prudent for investors to wait for a dip to buy WBA stock for better gains.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year.

1. Private equity firms set for tilt at Boots after approach by Bain, Ashley Armstrong, The Times, Jan 1. 2022 [↩]