Will Walgreens Earnings Blow Past Estimates Again?

Earnings season’s regular doldrums have settled in, and we can expect to see only a handful of reports out for the next two weeks. Here is a look at what happened on Thursday and what’s ahead.

After markets closed on Wednesday, Smith & Wesson beat consensus estimates on both the top and bottom lines. Still, earnings per share (EPS) were down 61% compared to the year-ago quarter, and revenue was down 20%. The company said its inventory levels have reached targeted levels at its major customers and that it expects lower inventory to boost shipments in the first half of its new fiscal year. Shares traded up nearly 14% early Friday morning.

Before U.S. markets opened on Friday, CarMax also reported better-than-expected EPS and revenue results. As was the case with Smith & Wesson, both profits and revenue were below year-ago quarterly totals. Higher prices for used cars drove margins to levels in line with last year. The stock traded up about 8.4% early Friday.

There are no earnings reports due out Friday afternoon, and only one, from Carnival, is due before U.S. markets open on Monday.

First thing Tuesday morning, Walgreens Boots Alliance Inc. (NYSE: WBA), a Dow Jones industrial average component, will report its fiscal third-quarter results.

Walgreens was one of 2023’s Dogs of the Dow, the 10 stocks that paid the best dividend yield at the end of December 2022. The stock has lost 21.2% from its share price over the past 12 months. Walgreens posted a new 52-week low just a month ago, and the shares have recovered a bit since, adding 5%. The company beat estimates in the previous quarter, and another solid beat on revenue and EPS, combined with the retailer’s big dividend yield, could light a fire under the share price.

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Of 18 analysts covering the stock, 13 have a Hold rating and just three have a Buy or Strong Buy rating. At a recent share price of around $32.00, the upside potential based on a median price target of $39.00 is 21.9%. At the high target of $52.00, the upside potential is 62.5.

For the company’s third quarter of fiscal 2023, analysts expect revenue of $34.12 billion, which would be down 2.1% sequentially but about 4.7% higher year over year. Adjusted EPS are pegged at $1.07, down 7.6% sequentially and up 11.5% year over year. For the full fiscal year ending in August, consensus estimates call for EPS of $4.45, down 11.6%, on revenue of $136.87 billion, up 3.14%.

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Walgreens stock trades at 7.2 times expected 2023 EPS, 6.7 times estimated 2024 earnings of $4.90 and 6.2 times estimated 2025 earnings per share of $5.32. The stock’s 52-week trading range is $29.48 to $42.74, and Walgreens pays an annual dividend of $1.92 (yield of 6.08%). Total return over the past 12 months was negative 16.97%.

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