WBA - Embedded Expectations Analysis - 2019 04 30
Walgreens Boots Alliance, Inc. (WBA:USA) currently trades below recent averages relative to UAFRS-based (Uniform) Earnings, with a 16.3x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management is concerned about reimbursement pressures, their Transformational Cost Management Program, and the potential and progress of their partnerships and joint ventures.Specifically, management may lack confidence in their ability to mitigate reimbursement pressures, manage SG&A costs, and offset operating income declines from the implementation of their Transformational Cost Management Program.
In addition, they may be concerned about industry-level margin headwinds, free cash flow, and the potential of their digitalization efforts. Moreover, they may be exaggerating the progress of their Kroger, Birchbox, and Sprint partnerships, Verily innovation capabilities, and the potential of their LabCorp partnership and joint ventures. Finally, they may lack confidence in the efficacy of plans to concentrate retail efforts on their flagship brands, in their ability to achieve long-term core business growth targets, and in the sustainability of Med D and senior generic utilization and immunization growth.
Walgreens Boots Alliance is a holding company. Through its subsidiaries, the company is engaged in retail and wholesale pharmacy. The company's operations are organized into three divisions, which are also its reportable segments: Retail Pharmacy USA; Retail Pharmacy International; and Pharmaceutical Wholesale. The Retail Pharmacy USA division has pharmacy-led health and beauty retail offerings. The Retail Pharmacy International division has pharmacy-led health and beauty retail businesses. The Pharmaceutical Wholesale division, which mainly operates under the Alliance Healthcare brand, supplies medicines, other healthcare products and related services to pharmacies, doctors, health centers and hospitals.
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