Earnings Preview: Mixed sentiment ahead of Walgreens Q1 earnings

Pharmacy store chain Walgreens Boots Alliance (WBA) is scheduled to report its first-quarter earnings Thursday before the opening bell. It is widely expected that earnings will grow about 10% year-over-year to $1.44 per share during the three-month period when revenues are estimated to increase by 11% to $33.64 billion.

Of late, the Deerfield, Illinois-based pharmacy network has been thriving on the successful acquisition of the drug stores of Rite Aid, which is estimated to generate revenues of more than half a billion dollars annually. The expansion of the company’s physical store network – with the latest target being China – is complemented with the strengthening of its digital platform, which contributes considerably to overall sales.

The positive momentum, as evidenced by the strong fourth-quarter results, is likely to be sustained in the first quarter and beyond, creating value for shareholders. The recent hike in dividend and the favorable valuation are the other attractions as far as investors are concerned.

Currently, the company is complementing the expansion of physical store network with the strengthening of its digital platform

Meanwhile, the fluctuations in the share price might continue in the coming weeks. So, it is advisable to wait and watch before buying or selling the stock. Currently, there are multiple challenges facing the conventional drug store operators in America, and the most serious among them is the huge inroads being made by Amazon (AMZN) into the drug retail space, after the recent acquisition of PillPack.

Last week, Walgreens shares suffered a blow after Goldman Sachs downgraded them and cut the price target, citing the fast-changing dynamics of the drug retail sector. The research firm believes the management of Walgreens should be doing much more to tackle the headwinds than just forging partnerships with businesses across industries, such as the alliance with FedEx (FDX) and Kroger (KR).

Also see: Walgreens Boots Alliance Q4 2018 Earnings Conference Call Transcript

In the fourth quarter, Walgreens’ earnings rose 13% to $1.48 per share and topped Wall Street estimates, aided by a 10% growth in sales, which, however, fell short of expectations.

While analysts, in general, recommend hold rating on the stock, with an average price target of $78.45, there are a few who have given the buy tag. The stock made a strong recovery after falling to a four-year low in June this year. However, it reversed the trend early this month and entered a downward spiral.

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