Post Earnings Coverage as Walgreens Earnings Jump 21.6% Pushes Out Deadline for Rite Aid Merger

LONDON, UK / ACCESSWIRE / October 28, 2016 / Active Wall St. announces its post-earnings coverage on Walgreens Boots Alliance, Inc. (NASDAQ: WBA). The company posted its financial results for the fourth quarter and fiscal year 2016 on October 20 2016. The largest U.S. drugstore operator by store count reported a jump in earnings and pushed out the deadline to close the $9.4 billion merger with Rite Aid Corp. (NYSE: RAD). Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Reviewed

For the three months ended on August 31st, 2016, Walgreens Boots Alliance reported net income of $1.03 billion, or $0.95 per share, up from $26 million, or $0.2 per share, for the same period last year. Adjusted Q4 FY16 net earnings increased 20.3% to $1.2 billion compared with the same quarter a year ago. Adjusted diluted net earnings per share for the quarter increased 21.6% to $1.07 compared to the same quarter a year ago exceeding analysts’ forecasts of $0.99 per share.

Sales in Q4 FY16 were $28.6 billion, an increase of 0.4% over the year-ago quarter; however sales came in below market forecasts of $29.11 billion. Operating income in Q4 FY16 was $1.1 billion, an increase of 36.4% from the same quarter a year ago.

FY16 Results

For FY16, Walgreens Boots Alliance saw earnings decreased 1.1% to $4.2 billion, while diluted net earnings per share dropped 4.5% to $3.82 compared with the prior year. Adjusted net earnings attributable to Walgreens Boots Alliance in fiscal 2016 increased 22.6% to $5.0 billion compared to the prior year. The company’s sales increased 13.4% to $117.4 billion in fiscal 2016 compared to the prior year. Operating income for FY16 came in at $6.0 billion, an increase of 28.6% from the prior year.

Segment Results

Walgreens Boots Alliance’s Retail Pharmacy USA division had Q4 FY16 sales of $20.7 billion, up 4.0% over the year ago quarter. Sales in comparable stores increased 3.2% compared to Q4 FY15. Pharmacy sales, which accounted for 69% of the division’s sales in the quarter, increased 6.2% on y-o-y basis. The division filled 229.5 million prescriptions adjusted to 30-day equivalents in the quarter, an increase of 3.7% over Q$ FY16. Adjusted operating income in Q4 FY16 increased 4.4% over the year-ago quarter to $1.1 billion. The increase in adjusted operating income was primarily driven by increased pharmacy volume, procurement efficiencies and cost controls.

The Retail Pharmacy International division of the company reported sales of $3.0 billion in Q4 FY16, down by 10.9% over the year-ago quarter due to the negative impact of currency translation, with sales increasing by 1.4% on a constant currency basis. On a constant currency basis, comparable store sales dropped 0.6% compared to the year-ago quarter. Operating income in Q4 FY16 increased 4.6% over the year-ago quarter to $205 million.

Walgreens Boots Alliance’s Pharmaceutical Wholesale segment had Q4 FY16 sales of $5.4 billion, a drop of 6.2% over the year-ago quarter. On a constant currency basis, excluding acquisitions and dispositions, comparable sales increased 2.9%. Operating income in the reported quarter was $156 million, which included $34 million from the company’s equity earnings in AmerisourceBergen compared to $133 million in the year-ago period.

Cash Matters

Walgreens Boots Alliance’s net cash provided by operating activities was $2.7 billion, and free cash flow was $2.2 billion in Q4 FY16. For FY16, net cash provided by operating activities increased $2.2 billion to $7.8 billion, and free cash flow increased $2.1 billion to $6.5 billion compared to the prior year.

Update on Rite Aid Acquisition

In a separate press release on the same day, Walgreens Boots Alliance and Rite Aid announced that they have mutually agreed to extend the end date of their merger agreement from 27 October 2016 to 27 January 2017. The companies now expect the transaction will close in early calendar 2017.

On 27 October 2015, the companies entered into a definitive agreement under which Walgreens Boots Alliance agreed to acquire all outstanding shares of Rite Aid for $9.00 per share in cash. Walgreens Boots Alliance announced that it remains actively engaged with the Federal Trade Commission (FTC) regarding its review of the pending acquisition, and continues to expect that the most likely outcome will be that the parties will be required to divest between 500 and 1,000 stores.

Walgreens Boots Alliance continues to expect that the acquisition will be accretive to its adjusted diluted net earnings per share in the first full year after closing of the transaction. The company also continues to expect that it will realize synergies from the acquisition in excess of $1 billion, to be fully realized within three to four years of closing.

Stock Performance

On Thursday, the stock closed the trading session at $82.16, marginally falling 0.17% from its previous closing price of $82.30. A total volume of 2.78 million shares have exchanged hands. Walgreens Boots Alliance’s stock price advanced 1.86% in the last month, 4.14% in the past three months, and 4.58% in the previous six months. The stock is trading at a PE ratio of 21.49 and has a dividend yield of 1.83%.

Rite Aid’s shares were also down 1.47% on the same day, finishing at $6.69 with a total of 10.43 million shares traded for the day. The stock has market cap of $7.11 billion.

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