WBA tops earnings forecast for 4Q, full year

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DEERFIELD, Ill. — As talks roll on to gain regulatory clearance for its acquisition of Rite Aid Corp., Walgreens Boots Alliance (WBA) posted adjusted earnings for its fiscal 2016 fourth quarter and full year that beat Wall Street’s estimates.

WBA said Thursday that GAAP net earnings attributable to Walgreens Boots Alliance totaled $1.03 billion, or 95 cents per diluted share, in the fourth quarter ended Aug. 31, compared with $26 million, or 2 cents per diluted share, a year earlier. The company said the increase reflects fluctuations in the quarterly fair value adjustments of its AmerisourceBergen Corp. warrants.

Adjusted net income attributable to WBA came in at $1.17 billion, or $1.07 per diluted share, for the 2016 quarter,  compared with $969 million, or 88 cents per diluted share, a year ago.  Analysts, on average, had projected adjusted earnings per share (EPS) at 99 cents, with estimates ranging from a low of 97 cents to a high of $1.02, according to Thomson Reuters.

WBA reported overall revenue of $28.64 billion for the fourth quarter, up 0.4% from $28.52 billion a year earlier. On a constant-currency basis, the increase was 2.5%.

Also on Thursday, WBA announced that it was extending the end date for its $17.2 billion deal to buy Rite Aid and said the acquisition “is progressing as planned.” The companies said they now expect the transaction to be completed early next year, pending Federal Trade Commission approval and other customary closing conditions.

Including its current estimate of 500 to 1,000 store divestitures, WBA expects the acquisition to be accretive to its adjusted diluted EPS in the first full year after transaction closes. The company reiterated that it expects to realize synergies of over $1 billion from the deal within three to four years after it’s finalized.

Stefano Pessina_Walgreens Boots Alliance

Stefano Pessina, CEO of Walgreens Boots Alliance

“We have continued to make good progress in putting in place the building blocks for the future growth of the business,” executive vice chairman and chief executive officer Stefano Pessina said in a statement.

“The exercise of the AmerisourceBergen warrants in August provides an example of the opportunities open to us to deploy capital, and the agreements we reached with Prime Therapeutics and with Express Scripts during the quarter demonstrate our commitment to a more collaborative and partnership-oriented approach,” he stated. “We believe this can help provide growth for our own company and that of our strategic partners while delivering better, more efficient and more effective service to patients and payers alike.”

For the fiscal 2016 year, WBA reported GAAP net earnings attributable to Walgreens Boots Alliance of $4.17 billion, or $3.82 per diluted share, versus $4.22 billion, or $4.00 per diluted share, in fiscal 2015. The company said the decrease stems from fluctuations in the fair value adjustments of the AmerisourceBergen warrants and a prior-year gain on the previously held equity interest in Alliance Boots, which was largely offset by higher operating income.

Fiscal 2016 adjusted net earnings attributable to WBA were $5 billion, or $4.59 per diluted share, compared with $4.09 billion, or $3.88 per diluted share, a year earlier. Analysts’ consensus estimate for 2016 full-year adjusted EPS was $4.51, with projections running from a low of $4.43 to a high of $4.54, according to Thomson Reuters.

WBA totaled sales of $117.35 billion for fiscal 2016, up 13.4% from $103.44 in fiscal 2015. The company said the gain reflects the inclusion of Alliance Boots consolidated results for the entire period and rising revenue in its Retail Pharmacy USA division, which includes the Walgreens and Duane Reade U.S. drug chains.

For the fourth quarter, the Retail Pharmacy USA division saw sales climb 4% to $20.75 billion from $19.95 billion a year ago.

Front-end sales dipped 0.5% in the quarter, mainly because of lower sales of certain consumables and seasonal items, which ws partially offset by higher sales in the health and wellness and beauty categories, according to WBA. The company said that by the end of the fiscal year the first phase of its new beauty concept had been rolled out to more than 1,600 stores.

Fourth-quarter pharmacy sales rose 6.2% and represented 69% of the division’s sales in the period. Prescription count grew 3.7% to 229.5 million (including immunizations), adjusted to 30-day equivalents. On a comparable-store basis, prescriptions filled increased 3.9%, primarily due to continued growth in Medicare Part D volume, WBA said.

Looking ahead, WBA projected adjusted EPS of $4.85 to $5.20 for fiscal 2017 adjusted diluted net earnings per share. The company said its guidance reflects accretion of 5 cents to 12 cents per share from Rite Aid and expectations for store divestitures and the closing date.

On average, analysts forecast fiscal 2017 adjusted EPS of $5.03, with estimates ranging from a low of $4.80 to a high of $5.20 cents, according to Thomson Reuters.

WBA added that its cost transformation program remains on track and is expected to provide $1.5 billion in savings by the end of fiscal 2017. Total pretax charges (GAAP) from the three-year restructuring program are projected at $1.3 billion to $1.5 billion, $300 million lower than the previous estimated range, the company said.



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