Walgreens' Shares Plunge On Weak Q3 Results (WAG)

Pharmacy chain Walgreen Company WAG reported fiscal third quarter results Tuesday before the bell that were below analysts forecasts. Shares plunged on the news in early Tuesday trading.

Third Quarter Results

For the fiscal third quarter ended May 31, Walgreen's reported earnings per share of $0.85, missing the consensus forecast for earnings per share of $0.91 by 6.59 percent. However, earnings per share rose 18 percent from the third quarter a year ago.

Revenue in the quarter was also slightly below expectations as revenue was reported at $18.31 billion vs. the consensus estimate of $18.45 billion, representing a miss of 0.76 percent. Revenue rose 3.15 percent from the third quarter of 2012.

"This quarter we continued to see a strengthening in our pharmacy performance as we maintained strong margins and increased our retail pharmacy market share from 18.4 percent to 19.2 percent year over year," said Walgreens President and CEO Greg Wasson. "This, in combination with our focus on cost control, and the contribution from Alliance Boots and related synergies, resulted in adjusted earnings per diluted share growth of 18.1 percent in the quarter."

"We also produced another strong quarter of operating cash flow of $1.4 billion. That said, our front-end sales are still not up to our expectations, and while the economy remains challenging, increasing customer traffic and front-end sales are our near-term priorities with a focus on pricing and promotion and the leveraging of our Balance® Rewards program, which now has 75 million members."

Quarterly Highlights

Besides the top- and bottom-line figures, Walgreen also reported that gross profit grew 4.1 percent from a year ago while gross profit margins rose 30 basis points. Meanwhile, SG&A expenses declined 5.3 percent from a year ago while the company opened or bought 39 new stores in the quarter.

Shares Drop

Markets did not like the lower than expected earnings number as shares plunged in early Tuesday trade. Walgreen's shares fell 6.87 percent to $44.73 after trading as low as $44.35 after the open.