Walgreens (WBA) Stock Earnings Preview

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Well folks, July is here and that means earnings season is upon us. Alcoa (AA) unofficially kicks of the quarterly routine on Wednesday, and you can safely count on investors to be tuned in.

walgreens-wag-stock-logo-185But it isn’t until Thursday that things really start to heat up, with PepsiCo (PEP) and Walgreens (WBA) set to report before the bell.

We’ll take a look at Walgreens, now technically called Walgreens Boots Alliance after acquiring the European pharmacy and beauty retailer Alliance Boots at the end of last year.

The fiscal third-quarter results mark the first full quarter of operations since the two companies became fully integrated.

So what exactly does Wall Street expect from the new-look company and from WBA stock on Thursday?

Walgreens Earnings Expected to Fall

Per-share earnings for WBA stock are expected to dip 4.4%, falling from 91 cents in the same period a year ago to 87 cents in the most recent period. And while analysts expect revenues to soar 53%, don’t get too excited. The jump is simply a result of the Boots Alliance acquisition, which was sort of a big deal, being the U.K.’s largest pharmacy and all.

Wall Street is looking for revenue of $29.6 billion.

I think Walgreens’ decision to diversify globally is a smart move, especially considering a consolidating drugstore industry that just saw rival CVS Health (CVS) snap up all the in-store pharmacies of Target (TGT) for a cool $1.9 billion. The month before, CVS nabbed Omnicare (OCR), a pharmacy services provider with a focus on nursing homes.

The other meaningful competitor in the space, Rite Aid (RAD) has also been making acquisitions to bolster growth.

So while Walgreens needed to make a move, I don’t think we’ll see an instant benefit to the WBA stock price. After all, Europe is in a state of disarray right now, and with Greece on the verge of exiting the eurozone, I wouldn’t be surprised if WBA management strikes a cautious tone in its forward-looking guidance.

After all, the dollar seems to be getting stronger against the euro by the day. In the past year, the USD/EUR exchange rate has soared 24%, and currently sits around 0.91. A year ago, $1 would buy you less than 0.74 euros.

At the end of the day, the gyrations in Europe are a short-term negative for WBA stock, but it’s all a question of how much analysts have factored that in.

Last quarter, for instance, Walgreens earnings included two full months of results after the completion of the Boots merger, yet despite a strong dollar the company managed to demolish earnings expectations. WBA stock shot higher as EPS of $1.18 breezed past the consensus 95-cent estimate.

Some think the company could do it again this quarter. A site devoted to reporting the “whisper” number, or what Wall Street really expects the company to earn, puts third-quarter WBA EPS at 94 cents.

In summary, only one thing is certain about Thursday’s earnings announcement: It’ll be a fascinating glimpse at what the future holds for the newly global drugstore.

As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/07/walgreens-wba-stock-earnings-preview/.

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