Walgreens Shares Fall Despite Improved Sales Forecast Due to Legal Expenses

Walgreens Boots Alliance Inc. raised its yearly sales forecast due to more favorable currency exchange rates and better-than-expected first-quarter revenue. However, shares fell because the company's profit outlook for fiscal 2023 was unchanged.

Walgreens said Thursday that sales for the year will be $133.5 billion to $137.5 billion, up from a previous estimate of $130.5 to $134 billion. Adjusted earnings will be $4.45 to $4.65 a share. The shares fell as much as 7.4%, the most intraday since June.

The company is facing a number of challenges, including a settlement of cases related to the nationwide opioid crisis that will cost the company $6.5 billion. Walgreens is hoping that the acquisition of specialty and urgent care provider Summit Health-City MD will help drive scale and profit in its US health-care segment. VillageMD, which is controlled by Walgreens, made the $8.9 billion purchase in November.

In the short term, Chief Financial Officer James Kehoe said that major acquisitions are not a priority for the company. He said that money spent on purchasing health-tech companies is likely to be in the hundreds of millions of dollars, not billions.

The company would be most interested in acquiring smaller companies that have specific capabilities that would help advance their organic business, he said.

According to Bloomberg Intelligence analyst Jonathan Palmer, there were no surprises in the quarterly results. Adjusted earnings for the quarter that ended Nov. 30 were $1.16 a share, beating Wall Street analysts' average estimate of $1.14. Revenue was $33.4 billion, ahead of expectations by $1 billion.

"The company is making progress with its transformation plan, despite a slight EPS miss, and guidance remains unchanged," Palmer said.

The international segment saw sales of $5.2 billion, down 11% from the year-ago quarter. This is just ahead of analysts’ expectation of $5.17 billion. Investors will likely be paying close attention to this unit after the company abandoned plans for a $6 billion-plus sale of its UK-based Boots pharmacy chain in June. This was after failing to get the desired value.

Walgreens' newly formed health-care unit fell short of estimates, bringing in $989 million in revenue. The company has been expanding its health-care offerings, adding primary-care centers to US locations and partnering with health insurers.

Walgreens has been investing in pharmacy automation technology to address labor shortages that started during the pandemic. The chain opened a ninth micro-fulfillment center for nationwide prescription service, Chief Executive Officer Roz Brewer said. The centers allows pharmacists to dedicate more time to clinical services and patient consultations rather than counting pills.

"Pharmacists will have more time for services and outreach that improve patient health," she said on the investor call. This will help improve adherence and overall patient health.

On Wednesday, Walgreens announced that it plans to seek US certification to dispense the abortion pill, after the US Food and Drug Administration issued a ruling broadening access. This makes Walgreens the first major pharmacy chain to take this step.

A spokesperson for the company said that they are working to register their pharmacists and train them in the necessary requirements, as well as evaluating their pharmacy network to ensure that they are dispensing products in accordance with federal and state laws.