Retail pharmacy chain Walgreens Boots Alliance (NASDAQ: WBA) fell in pre-market trading at the time of publishing on Tuesday after the company lowered its FY23 outlook and now expects adjusted earnings of $4.00 to $4.05 per share from its prior outlook in the range of $4.45 to $4.65 per share. The company stated in its press release that it had lowered its outlook as a result of “challenging consumer and macroeconomic conditions, and lower COVID-19 vaccine and testing volumes.”
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WBA’s CEO Rosalind Brewer commented, “…significantly lower demand for COVID-related services, a more cautious and value-driven consumer, and a recently weaker respiratory season created margin pressures in the [third] quarter. Our revised guidance takes an appropriately cautious forward view in light of consumer spending uncertainty, while still demonstrating clear drivers of a return to operating growth next fiscal year. We are raising our cost savings program target to $4.1 billion and taking immediate actions to optimize profitability for our U.S. Healthcare segment.”
The company added that it expects its adjusted operating income growth rate to rise in fiscal Q4 from 0.6% in fiscal Q3 even as it battles challenges which include a shift in consumer spending, a higher effective tax rate, and the impact of a weak respiratory season on its retail pharmacy and its healthcare business.
In FY24, WBA anticipates its adjusted operating income to grow in the low-to-mid-single digit and at a higher rate than adjusted EPS “due to a higher tax rate and a negative impact from non-controlling interest.”
In the fiscal third quarter, WBA reported adjusted earnings $1 per share, up by 3.6% year-over-year on a constant currency basis but still below consensus estimates of $1.07 per share. The pharmacy retailer’s Q3 sales increased 8.6% year-over-year to $35.4 billion and ahead of Street estimates of $34.23 billion.
Analysts remain sidelined on WBA stock with a Hold consensus rating based on three Buys, seven Holds, and two Sells.
