Walgreens posts quarterly earnings beat as prescription drug sales rise

Walgreens Boots Alliance on Thursday beat fiscal third-quarter earnings estimates as higher prescription drug sales helped the company regain its footing after CEO Stefano Pessina dubbed last quarter “the most difficult” since the company was formed.

Walgreens reported adjusted earnings of $1.47 per share, beating analysts polled by Refinitiv’s expectations of $1.43 per share. The drugstore chain posted $34.59 billion in sales. Analysts had expected $34.46 billion.

Shares of the company rose 2% in premarket trading.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

• Adjusted earnings per share: $1.47, vs. $1.43 expected
• Revenue: $34.59 billion vs. $34.46 billion expected

Walgreens reported fiscal third-quarter net income of $1.03 billion, or $1.13 per share, down 12.1% from the $1.34 billion, or $1.35 per share, the company reported a year earlier. On an adjusted basis, Walgreens earned $1.47 per share, above the $1.43 per share analysts expected.

Sales in the quarter, which ended May 31, increased 0.7% from the year-ago quarter, or 2.9% after accounting for fluctuations in currency rates. Walgreens attributed the increase to growth in its U.S. retail pharmacy business and pharmaceutical wholesale business. Sales in its U.S. drugstores open for at least a year fell 1.1% from the year-ago quarter, which Walgreens attributed to its “de-emphasis” of tobacco products.

Walgreens maintained its full-year forecast of earnings to be roughly flat. The company cut its outlook last quarter from the previously guided 7% to 12% growth.

Walgreens and its competitors are under pressure, with insurers paying pharmacies less to fill prescriptions and consumers buying fewer household items at drugstores and more online. Facing these challenges, Pessina dubbed last quarter the “most difficult” quarter since Walgreens acquired European drugstore chain Alliance Boots in late 2014 to form Walgreens Boots Alliance.

In the fiscal third-quarter, Walgreens said rising prescription drug prices and an increase in those sales led the 4.3% increase in U.S. pharmacy sales.

“Following a difficult second quarter, we made progress in the third quarter against the strategic goals we set, and are pleased to report an improvement in our U.S. comparable growth compared with the first half of the year,” Pessina said.

Walgreens has signed more than a dozen partnerships, with companies like Sprint, FedEx, Kroger and LabCorp, mainly aimed at driving more traffic into its stores. While these deals could help Walgreens test new store formats, analysts are skeptical they will drive meaningful revenue growth.