Walgreens shares spike on upbeat Q2 results

The news shaping the markets today

The first shipment of Germany’s 18 Leopard 2 tanks, ammunition and spare parts, and British Challenger 2 tanks have arrived in Ukraine. The safe-haven US dollar index rose this morning.

Canada’s government reported a budget deficit of C$0.91 billion in January, versus a gap of C$5.17 billion in the year-ago month. Despite this, the CAD/USD forex pair remained under pressure.

Australia’s monthly Consumer Price Index indicator rose 6.8% in the year to February 2023, which sent the AUD/USD pair lower in forex trading this morning.

Vietnam’s gross domestic product grew 3.32% year-over-year in the first quarter, down from 5.92% growth in the fourth quarter, which exerted pressure on the VND/USD forex pair.

The American Petroleum Institute said that US crude stockpiles fell by 6 million barrels in the week ended March 24, which sent the WTI crude oil prices higher this morning.

What’s happening: Shares of Walgreens Boots Alliance gained on Tuesday, after the company released results for its second quarter.

What happened: Walgreens posted quarterly results that exceeded market expectations.

However, demand for covid-19-related products fell in the quarter, significantly impacting the company’s operating income.

How were the results: The US pharmacy chain reported single-digit sales growth for its second quarter.

• Sales rose 3.3% year-over-year to $34.9 billion, topping the consensus estimates of $33.53 billion.
• Profits fell to $703 million, or 81 cents per share, from $883 million, or $1.02 per share, in the year-ago period.
• Adjusted earnings came in at $1.16 per share, exceeding Wall Street expectations of $1.10 per share.

Why it matters: Walgreens reported a decline in quarterly profits amid lower sales of covid-19 vaccines and tests, and higher payrolls at pharmacies due to labour shortage.

Labour shortages during the pandemic had forced Walgreens and other drugstore chains in the US to increase minimum wages to $15 per hour. Around 500 pharmacy stores of the company resumed with normal working hours, while 1,900 continued to operate with shortener schedules.

Expenses grew 6.3% to $5.5 billion during the quarter, which included a $306 million pre-tax charge related to opioid claims and litigation.

The company’s pharmacy sales rose slightly by 0.3%, while comparable pharmacy sales grew 4.9%, driven by an increase in prices for branded drugs. However, retail pharmacy sales declined 0.3% due to lower demand for covid-19 vaccines and tests.

The company administered 2.4 million covid-19 vaccinations during the latest quarter, down significantly from about 11.8 million in the year-ago period. Walgreens reported a decline of 25.4% in its adjusted operating income on a constant currency basis to $1.2 billion.

Management maintained their adjusted earnings guidance for fiscal 2023 at $4.45-$4.65 per share, despite the decline in demand for covid-19-related products.

How shares responded: Shares of Walgreens gained 2.7% to close at $33.82 on Tuesday, following the release of quarterly results. The stock has lost around 4% over the past month.

What to watch: Investors will keep an eye on the labour market and any update on the spread of covid-19 infections.

The markets today

The British pound will be in focus today ahead of a basket of economic reports

Context: The GBP/USD forex pair recorded gains on Tuesday, hitting a seven-week high.

Details: The global financial markets have remained volatile in recent weeks due to the collapse of SVB and Credit Suisse’s emergency rescue by UBS. Banking concerns eased following steps taken by regulators.

Bank of England Governor Andrew Bailey said that the country’s financial system was resilient and well placed to support the economy. He added that the country was not facing any stress related to the collapse of Credit Suisse and Silicon Valley Bank.

On the economic data front, the UK’s grocery inflation accelerated to a record high of 17.5% in March, according to market researcher Kantar.

Last week, the Bank of England raised its benchmark interest rate by 25 basis points to 4.25%. Speculations are almost evenly divided between the central bank pausing rate hikes and raising by 25 bps at its May meeting.

The GBP/USD forex pair gained around 0.5% to reach 1.2342 on Tuesday. London’s FTSE 100 rose 0.17% to settle at 7,484.25, with gains in energy and materials stocks. However, the domestically focused FTSE 250 index fell 0.72% to close at 18,396.69.

What are expectations: Traders await the release of economic data on consumer credit, mortgage lending and mortgage approvals today. Consumer credit in the UK, which rose by £1.597 billion in January, is expected to increase by £1.1 billion in February. Analysts expect net borrowing of mortgage debt by individuals to rise to £2.8 billion in February, from £2.5 billion in January, while net approvals for house purchases in the UK are projected to rise to 41,500 in February, from 39,600 in the prior month.

Other Markets: US trading indices closed lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.12%, 0.16% and 0.49%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Germany’s GfK consumer climate indicator, France’s consumer confidence, ECB’s non-monetary policy meeting, US MBA mortgage applications, pending home sales, crude oil inventories, gasoline stocks change and distillate stocks, Brazil’s loan growth, producer prices and net payrolls, Russia’s unemployment rate, real wages, business confidence barometer, corporate profits, retail sales, industrial production and GDP, as well as Argentina’s economic activity estimator.