02 April 2020

Does Walgreens Have a New Prescription for Success?

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What’s happening: Walgreens Boots Alliance is scheduled to report its second-quarter results before the opening bell on Thursday, April 2.

What happened: Walgreens will be one of the first major US healthcare companies to report earnings since the pandemic gripped the country. Earnings from America’s largest drugstore chain will be an early indicator of the healthcare segment’s performance amid the COVID-19 outbreak.

There’s been a steep decline in Walgreens’ shares so far in 2020, especially after the company reported dismal results for the first quarter. Expectations for the second quarter call for a massive decline in earnings. Despite this, investor sentiment for this stock has recently turned positive.

  • The consensus revenue estimate stands at $35.24 billion, representing 2.1% year-over-year growth.
  • The estimate for earnings is $1.46 per share, an 11% decline from the same quarter in the previous year.

Why it matters: Even as most businesses are impacted by stay-at-home orders due to the coronavirus outbreak, retail drugstores are considered essential services and are allowed to remain open across the US.

US pharmacy chains are witnessing heavy footfall and spike in their online sales, with customers stocking up on personal care items, toilet paper, hand sanitizers and disinfectants. Last month, Rite Aid announced that its sales had surged around 10 times from normal levels since coronavirus hit the country.

Walgreens stands to gain even more, given global spread of the virus and the fact that the company has a presence in over 25 countries.

Walgreens is taking various initiatives to meet the rising demand. It has partnered with courier company Postmates to expand its on-demand delivery across the country. The company also announced a plan to enable customers to buy non-prescription items from drive-thru pickup windows at all its stores. Moreover, the pharmacy chain major is hiring over 9,500 full- and part-time employees.

Walgreens is investing heavily in technology and has plans to expand its partnership with Indian tech firm Tata Consultancy Services to boost its digital transformation.

How the shares have performed so far: Shares of Walgreens have taken a beating so far in 2020, falling around 27% year to date. The stock has recently found favour among investors and has risen almost 4% in the last five trading days.

What to watch: After posting disappointing results in the previous quarter, Walgreens is under pressure to beat estimates this quarter. Lower reimbursement rates from insurers and a decline in the prices of generic drugs could hurt the company’s earnings. Investors will be keeping an eye on the company’s outlook, expecting healthy sales growth.

The Markets Today

     

Investors will be watching European indices today, after the decline in stocks in the previous session.

Context: European markets dipped on Wednesday, as global market sentiment took a beating after the White House issued a grim outlook for coronavirus.

Details: US President Donald Trump warned of a rough two week-period ahead for the country and White House officials predicted between 100,000 and 240,000 coronavirus deaths in the nation despite the social distancing guidelines.

The pan-European Stoxx 600 index closed 3% lower on Wednesday, with the travel and leisure sector being the worst performer. Banking shares also dropped around 6% with lenders in the UK announcing plans to scrap dividends for 2020 after the Bank of England lowered interest rates.

Coronavirus continued to dominate the overall market sentiment, with total cases crossing 937,000 globally. Italy has reported around 110,500 cases, while Spain’s case-count exceeded 104,100. The spread of this disease has impacted the manufacturing sector. The Eurozone manufacturing PMI was reported yesterday, with a declined to 44.5 for March from a reading of 49.2 in February.

The FTSE 100 fell 3.8% on Wednesday, while French 40 closed lower by 4.3%. Shares of the Swiss retailer Dufry tumbled 19%. Norway’s SalMar bucked the negative trend, spiking 10%.

What to watch: Investors are hoping for the ECB (European Central Bank) to act sooner than later to ease the economic impact from coronavirus. Markets also await producer prices report from the Eurozone. Industrial producer prices, which increased 0.4% in January, are expected to decline 0.2% in February. The producer price index is expected to decline 0.7% in February, after a 0.5% decline in January.

Other Markets: US indices closed lower on Wednesday, with the Dow, S&P 500 and Nasdaq 100 all down more than 4%.

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What else to watch today

     

Spain’s unemployment change and tourist arrivals, Canada’s balance of trade, Brazil’s federal tax revenues as well as the US Challenger job cuts, balance of trade, initial jobless claims, ISM New York index, factory orders and natural gas stocks change.

 

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