Text size

Walgreens Boots Alliance

shares were rising after the pharmacy chain reported quarterly earnings that beat expectations and stuck with an earlier forecast of profits.

For its fiscal second quarter, the three months ended Feb. 28, Walgreens (ticker: WBA) posted adjusted earnings of $1.16 a share, lower than the $1.59 a share recorded a year ago, but higher than the $1.10 analysts expected. 

Sales in the period were $34.9 billion, rising from a year ago and beating analysts’ expectations of $33.5 billion. U.S. retail pharmacy sales were down from a year earlier, while international sales and U.S. healthcare sales rose.

The U.S. healthcare segment was aided by Walgreens’ $3.5 billion investment to support primary care provider VillageMD’s purchase of Summit Health—the parent company of the CityMD urgent-care centers—in a deal that closed in January.

“Their investment in primary care and other health services looks like an attractive alternative to improve profitability and reduce their reliance on the payers directing patients to them,” analyst Shoggi Ezeizat of research firm Third Bridge said in a research note.

Walgreens maintained a forecast that fiscal 2023 adjusted earnings per share will come in at $4.45 to $4.65 “as strong core business growth is more than offset by lapping peak Covid-19 demand.”

“WBA exited a solid second quarter with acceleration in February, adding to our confidence in driving strong growth in the second half of the year,” said Chief Executive Officer Rosalind Brewer in a news release.

In an email to investors on Tuesday,

Mizuho

healthcare equity strategist Jared Holz wrote that investors will be focused on any commentary Walgreens executives might make about the future of Boots, their U.K.-based retail chain, on a Tuesday call to discuss the results.

“Recent headlines have indicated management may be close to selling/divesting the unit,” Holz wrote. “Whether this serves as a major catalyst remains to be seen but perhaps could set the stage for a step-up in building out the US franchise.”

Alongside

CVS Health

(CVS), Walgreens said in November it had reached a settlement in the litigation brought by states and local governments across the U.S. over its alleged role in the opioid crisis. In January, Walgreens reported an after-tax charge of $5.2 billion related to opioid claims and litigation in the first quarter of its fiscal year.

On Tuesday, the company reported a $306 million pretax charge in its second quarter.

Walgreens shares are down 30% over the past 12 months, lagging behind the rest of the healthcare sector. The

Health Care Select Sector SPDR Fund
(XLV), which tracks the healthcare stocks in the S&P 500, is down 6.9% over the same period.

Ahead of the earnings, Mizuho Securities analyst Ann Hynes offered her perspectives on the company in a healthcare research industry update on Monday. 

“We believe the greatest wild cards for guidance are the recapture of lost prescription market share, pressure on shrinkage, and changes to consumer discretionary spending,” Hynes wrote. 

“We expect WBA to maintain FY23 guidance; we believe it is too early in the year to change it, as guidance is back-end loaded,” she added. 

Shares of Walgreens were up 1.7% early Tuesday. So far this year, shares have fallen about 12%. 

Write to Emily Dattilo at emily.dattilo@dowjones.com