WBA - Walgreens offsets falling COVID-led demand thanks to healthcare unit

2023-03-28 08:10:56 ET

Walgreens Boots Alliance ( NASDAQ: WBA ) posted better than expected financials for Q2 FY23 on Tuesday as the company withstood lagging demand for COVID-19 vaccinations and tests thanks to its U.S. healthcare segment.

Walgreens’ ( WBA ) healthcare segment, which comprises its healthcare provider VillageMD recorded $1.6B in sales for the quarter, implying a $1.1B rise from the prior-year quarter.

However, the unit recorded an operating loss of $472M compared to $212M a year ago, while adj. EBITDA loss rose ~76% to $109M, driven by VillageMD expansion and higher organic business investments.

In November, through its VillageMD unit, the pharmacy chain agreed to acquire healthcare provider Summit Health for ~$9B with investments from Evernorth, the PBM unit of Cigna ( CI ).

While Walgreens’ ( WBA ) adjusted earnings per share fell ~27% YoY to $1.16, indicating a ~26% impact from lower COVID-19 vaccine and testing volumes, the company grew its topline ~3% YoY to $34.9B.

The company-wide operating income fell to $0.2B from $1.2B a year ago after accounting for a $306M pre-tax charge for opioid-related claims and litigation.

Q2 sales from the U.S. Retail Pharmacy segment remained flat at $27.6B, while total prescriptions filled, including vaccinations, slipped ~1% YoY to $298.0M on a measure adjusted to 30-day equivalents. Comparable sales grew ~3% YoY compared to ~10% in Q2 FY22, when there was a strong demand for COVID-19 vaccinations and testing.

The company’s International segment reported $5.7B in sales, indicating a ~2% YoY rise despite currency headwinds as Boots UK comparable pharmacy sales grew ~2% amid lower demand for COVID-19 services.

Expecting the strength of its core business to more than compensate for the sluggish COVID-related demand, Walgreens ( WBA ) reiterated its full-year adjusted EPS guidance of $4.45 – ­ $4.65.

Read: Seeking Alpha contributor Geoffrey Seiler argues that the company’s pivot to healthcare will help it revive growth in the years ahead.

For further details see: