Walgreens should get a boost from omicron, home testing demand and pediatric vaccines, analysts say

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Analysts at Mizuho say that with COVID-19 infections reaching peak levels, Walgreens Boots Alliance Inc. should be boosted by the demand for vaccine administration and at-home testing.

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Walgreens WBA,
+0.87%
It reported fiscal first-quarter results, which beat expectations last week, and raised its full-year outlook. The pharmacy retailer also announced that it has created a new healthcare reporting segment for its growing primary care business, Walgreens Health.

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Analysts at Mizuho Securities said in a note, “We believe that COVID-19 testing will remain strong in FQ 2:22 and Walgreens is targeting the target given the recent spike from the Omicron variant and strong demand for home tests.” can be obtained.”

More Americans are in hospital with COVID-19 than at the peak of last winter, and the WHO has warned that more than half of Europe could be infected with Omicron within weeks

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Walgreens Chief Executive Rosalind Brewer said on the company’s earnings call that it had administered 56 million COVID vaccines as of last Monday.

According to the FactSet transcript, “Walgreens began offering COVID Vaccine Boosters in September and so far, we have delivered over 9 million doses.”

“Our testing and diagnostics business has completed over 22.9 million COVID tests so far. Not only will we continue to grow this important service as part of our pandemic effort, we are building on this platform as we develop a broad range of trial and diagnostic solutions for our customers. ,

The company began vaccinating children between the ages of 5 and 11 in the US in November 2021.

Looking ahead, Chief Financial Officer James Kehoe says the company expects 30 million vaccinations this year, up 5 million from previous guidance. Of that, 19 million are expected to be boosters and 2 million to 2.5 million will be pediatric vaccines.

,[T]The biggest driver in the first quarter is actually probably testing as opposed to vaccines,” said Kehoe, estimating earnings per share contribution from testing and vaccines.

“And it’s probably in the range of $0.12 to $0.15 for the full year. So, I’m giving you the full year number. So there’s $0.09 on vaccines and testing, call it $0.12 to $0.15. So that’s a pretty big contribution for the full year. “

CVS Health raises income threshold to 2021 and supports outlook for 2022

Walgreens raised its full-year adjusted EPS guidance to low-single-digit growth from previously flat. The FactSet consensus is for an EPS of $5.02, which means an increase of 2.2%.

“We believe there is potential for upside to the guidance raised. We estimate that 1 million each in additional COVID vaccines will bring ~+$0.02 to FY22 adjusted EPS,” Mizuho said.

“We view Walgreens’ strategy and execution as a key driver of stock performance to transform Walgreens Health into both a revenue and earnings growth engine.”

Mizuho rated Walgreens stock neutral with a target of $56.

UBS analysts were “surprised” that the stock didn’t react more favorably to the results.

Walgreens shares closed down nearly 3% on Thursday when the results were announced. Walgreens shares are up 13.5 percent over the past year. s&p 500 index spx,
+0.62%
This is an increase of 23.4% for the period.

“Investors are probably a little overwhelmed by the increase in guidance and
Commentary around 2Q, but management acknowledged that it was still early in the fiscal year and we believe they are conservative,” analysts said.

“Ultimately we believe Walgreens stock will trade on the successes of the health business, based on how well it integrates its recent acquisitions and growth and margins.”

Walgreens shares are neutral with a UBS Rates price target of $52.

Will this COVID-19 wave boost herd immunity? If you had Omicron are you less likely to get sick again? Why this ‘lighter’ version is a double-edged sword

Raymond James evaluates the market performance of Walgreens.

“While this was a strong quarter, margins are likely to be under pressure during the rest of the year as vaccine and testing gains are likely to peak in 1H22, due to both seasonality and competition from the Biden administration. Re: 500 million at-home tests ,” said the analysts.

“At the same time, the continued reimbursement headwind and $120 million of labor headwind will remain in the form of structural issues.”

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