Walgreens Boots Alliance (NASDAQ:WBA) reported a significant beat on adjusted earnings per share (EPS) for the second quarter, coming in at $1.20, which was $0.38 higher than the analyst estimate of $0.82. Revenue also surpassed expectations at $37.1 billion, against the consensus estimate of $35.9 billion, marking a 6.3% increase from the same quarter last year.
Despite the earnings beat, shares of WBA fell slightly by 1.05%, likely influenced by a substantial impairment charge related to VillageMD goodwill. This non-cash charge led to a reported net loss of $5.9 billion for the quarter, a stark contrast to the net earnings of $703 million in the previous year's quarter.
CEO Tim Wentworth expressed optimism, highlighting the company's positive adjusted EBITDA in the U.S. Healthcare segment and top-line growth. However, he acknowledged the challenges in the retail environment and the company's focus on customer engagement and value. Wentworth remains confident in achieving the goal of $1 billion in cost savings for the fiscal year.
For fiscal 2024, WBA has narrowed its adjusted EPS guidance to a range of $3.20 to $3.35, with the midpoint slightly below the analyst consensus of $3.24. This updated outlook reflects the current retail challenges in the U.S., an early wind-down of the sale-leaseback program, and lower earnings from Cencora share sales, somewhat offset by strong pharmacy services execution and a lower adjusted effective tax rate.
The company is maintaining its U.S. Healthcare adjusted EBITDA guidance, expecting to break even at the midpoint of the ($50) million to $50 million range. This guidance, alongside the reported earnings beat, suggests a cautious but steady approach to navigating the fiscal year amid a challenging retail landscape.
Reacting to the report, analysts at BofA said it was a mixed quarter, with US retail slightly below expectations.
"The new CEO remains focused on right-sizing the cost base and improving cash management and we expect to hear color on progress around these efforts. Given limited visibility and the weak embedded 2H EPS guidance, we look for additional commentary on the drivers. We maintain our Underperform rating," wrote the firm.