(By Tim) Walgreens Co. (NASDAQ: WAG) is scheduled to release the company's 3rd quarter financial results on June 22, 2010. The quarter covers the months of March, April and May. The company will also have a webcast conference call on the same day at 8:30 AM eastern time.
The consensus estimate for Walgreen's third quarter earnings is 57¢ per share on revenues of $17.14 billion. For the 3rd quarter of 2009, WAG earned 53¢ on $16.21 billion of sales. The earnings per share estimates range from 51¢ to 60¢ from the 18 analysts following Walgreens.
Over the last year, Walgreens has not thrown any big surprises concerning earnings reports. The 3rd quarter results of 2009 were 3 cents below the estimates, the next two quarters were a penny and nickel higher than the consensus, respectively. For the most recent quarter, Q2 of 2010, WAG missed the average estimate by 3¢ but the 68¢ per share in reported earnings included 2 cents of restructuring charges.
During the quarter, the company reported year over year sales increases of 6.2% in March and 5.9% in both April and May. These numbers provide an accuracy check on the revenue estimate, which is predicting a 5.8% growth in revenues for the quarter.
The big, recent news concerning Walgreens is the conflict between the company and CVS Caremark (NYSE: CVS) concerning payments for prescriptions filled for participants in CVS Caremark's pharmacy network plans. On June 9, Walgreens announced they will no longer participate in the network plans. CVS Caremark is the one of the nation's largest providers of prescription drug plans. Analysts are predicting the split will have a negative impact on the revenues of both companies. This is from the Walgreen press release:
"In the three years since the CVS-Caremark merger, it has become increasingly clear to us that Caremark's approach to Walgreens as a community pharmacy within CVS Caremark's retail network has fundamentally changed, and we are no longer viewed as a valued community pharmacy within its PBM network," said Kermit R. Crawford, Walgreens executive vice president of pharmacy.
The split did not happen until after the 3rd quarter was closed out, but the fallout has been having a negative effect on both the share price and earnings estimates. Over the last 90 days, the consensus estimate for WAG's earnings has fallen from 60¢ per share to the current 57 cents. Since April 1, the share price of WAG has fallen by 20% while the S&P 500 is down by just 5%.
It appears the market is discounting the WAG-CVS breakup by driving down the share price. A negative earnings surprise could accelerate the price drop. A positive earnings result may not have the opposite effect due to the fact the 3rd quarter was completed before the break-up became official.
