Walgreens Boots Alliance Q3 Adjusted Earnings Top Expectations, But Shares Fall

Walgreens Boots Alliance Inc WBA announced a 15.3 percent drop in net earnings for the third quarter despite 2.4 percent growth in net sales. There was an absence of significant other income in the current quarter thus impacting the profit. However, adjusted earnings grew 15.7 percent and came in above the Street analysts' estimations. The mid-point of the company's full year adjusted earnings forecast was above the predictions.

Walgreen Boots Alliance reported net earnings of $1.1 billion, down 15.23 percent from $1.2 billion while earnings fell 14.4 percent to $1.01 a share from $1.18 a share in the year-ago quarter. However, on an adjusted basis, its earnings would have advanced 14.7 percent to $1.3 billion and adjusted EPS 15.7 percent to $1.18. Street analysts were looking for earnings of $1.14 a share.

The company's net sales in the third quarter were $29.5 billion, up 2.4 percent from $28.8 billion in the previous year quarter, or 3.3 percent on a constant currency basis. This was lower than the analysts' expectations of $29.71 billion.

Its Executive Vice Chairman and CEO, Stefano Pessina, commented, "We delivered solid results in the quarter while continuing to make progress in several key areas, including our work to develop long-term strategic relationships and pursue partnership opportunities. I'm pleased to report that since the quarter end we achieved our goal set four years ago of at least $1 billion in combined net synergies in fiscal year 2016 related to the strategic combination with Alliance Boots. This provides us with a strong platform to further enhance operating performance, to meet the challenges of the current volatility in many of our markets and to better position our company for long-term success."

Walgreen said its combined net synergies were $330 million in the third quarter and $947 million in the first nine months of fiscal 2016. In June, the company achieved its goal set in 2012 to reach a minimum of $1 billion in combined net synergies in fiscal 2016 relating to the strategic combination with Alliance Boots.

The company's GAAP operating cash flow was $2.1 billion in the third quarter, while it generated free cash flow of $1.9 billion.

Moving ahead, the company boosted its the lower end of its guidance by $0.10 per share for fiscal year 2016. As a result, it now expects adjusted net earnings to be $4.45 to $4.55 a share. The mid-point of $4.50 is higher than the Street estimation by a penny.