💊 Can Walgreens Catch Up With Its Rival?

Goldman Sachs gets China nod; GM lawsuit dismissed.

Hey Global Investor! Here’s what you need to know before the US markets open.

Market Snapshot 📈

S&P 500 (Friday’s Close) 4,471.37 +33.11 (0.75%)

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💊 Walgreens: What’s Up Doc?

Walgreens Boots Alliance (WBA), the second-largest pharmacy in the US, was busy administering Covid vaccines the past few quarters. As such, it beat analyst estimates for Q4 and outlined plans for its next growth engine. Investors can’t wait to see the much-needed transformation take place soon. (Tweet This)

The Growth Vaccine

Companies large and small have instituted mandatory vaccination protocols for their employees. Walgreens is a direct beneficiary of these policies as people flocked to its pharmacies to get jabbed. The direct impact of this was felt on the company’s quarterly earnings.

Key Stats From Q4:

  • Revenue: $34.26B Vs $33.3B expected
  • EPS: $1.17 Vs $1.02 expected

The pharmacy chain administered 13.5M vaccines during Q4 (Vs. estimates of 7M doses it had expected earlier and compared to 17M doses administered in Q3). With booster doses for adults and vaccine approvals for children coming in, Walgreens is expected to continue to be busy on the vaccination front in the coming quarter as well.

Walgreens’ sales also received a boost from a growing demand for at-home Covid tests and a rebound in over-the-counter medication for common cold, cough, and flu. The result was a 14% year-on-year growth in the sale of health and wellness products. Sales at US stores open for at least a year saw growth of 8.1% from last year.

Another positive that was evident from the results was cost savings. It reached its goal of reducing annual costs by $2B from its business a year ahead of schedule. As a result, the cost savings goal for the fiscal year 2024 was raised to $3.3B.

A Doctor In The Pharmacy?

In 2019, Walgreens launched a trial partnership with Chicago-based VillageMD to provide primary care services across 15 markets to over 1.6M patients. After receiving a positive response from the trial clinics, Walgreens invested $1B to expand the program this past January.

With this, Walgreens has become the first national pharmacy chain to offer full-service primary care clinics co-located at its stores on a larger scale. Last week, Walgreens announced an additional $5.2B investment in VillageMD, becoming its majority owner.

The goal is to have at least 600 primary-care clinics in more than 30 US markets by 2025 and increase the number to 1K by 2027. Pending regulatory approval, the deal is likely to close by the end of this year. VillageMD will remain a separate entity and might even go for an IPO at an appropriate time.

Walgreens also made a $330M investment in health-at-home solutions provider CareCentrix, which manages care for over 19M members in 20+ states and has over 7.4K locations in the US. This infusion values the company at $800M, and Walgreens will own 55% of CareCentrix.

Today, there’s a Walgreens pharmacy within five miles of 75% of the US population. The pharmacy company is trying to catch up with arch-rival CVS Health, whose stores already have a MinuteClinic, which administers vaccines, offers walk-ins, and allows urgent care appointments.

However, there’s a chink in Walgreen’s armor. The company continues to sell cigarettes and tobacco products, a practice CVS stopped way back in 2014. The company said that tobacco products are under “real scrutiny,” and more will emerge on this front in due course.

Shareholders have welcomed this move and are hopeful as the company transforms itself into a one-stop healthcare services provider. It seems they can’t wait to see Walgreen’s trademark red color start spewing wads of the greenback!

Market Reaction
WBA ended at $48.92, down 3.64%. This is after a 7.5% jump on Thursday. Shares are up 18.2% this year.

Company Snapshot 📈

WBA $48.92 -1.85 (3.64%)

Analyst Ratings (22 Analysts) BUY 5%  HOLD 86%  SELL 9%

Newsworthy 📰

Dismissed: Michigan judge tosses GM lawsuit against Fiat Chrysler (GM +0.58%)

Worries: Morgan Stanley downgrades Bed Bath & Beyond, says the retailer is in for a tough two years (BBBY -2.98%)

Green Light: Goldman Sachs moves to full ownership of China securities JV (GS +3.80%)

Later Today 🕒

  • State Street Corp. Earnings (STT)
  • Albertsons Companies Inc. Earnings (ACI)
  • Steel Dynamics Inc. Earnings (STLD)
  • PacWest Bancorp Earnings (PACW)
  • Hexcel Corporation Earnings (HXL)
  • FB Financial Corp. Earnings (FBK)
  • 6:45 PM IST: Industrial Production

Today’s Market Terminology: Annual Report

An annual report is a comprehensive report on a company’s activities throughout the preceding year. Annual reports are intended to give shareholders and other interested people information about the company’s activities and financial performance

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