Walgreens Off A Comfortable 13% on Earnings

Walgreens (WBA) announced results where they slightly missed top line revenues & missed earnings.

Net income fell to $1.16 billion, or $1.24 a share, from $1.35 billion, or $1.36 a share, in the same period a year ago. Excluding nonrecurring items, the company said adjusted EPS declined 5.4% to $1.64, below the $1.72 that FactSet analysts were expecting.

In addition, to complete a near perfect quarter, they also lowered forward guidance to suggest they would likely be flat for earnings year over year, down from an estimated increase of 7 – 12%.

They might have another down day or two, but this feels a lot like AT&T trading at around $26 a share last year.

A couple catalysts:

Increased Buyback & Increased Buyback Impact

  • On the conference call they suggested they were increasing share buybacks by over 25%: “we project full year share repurchases of $3.8 billion compared to $3 billion guidance at the beginning of the year. This contributes 4.5% to EPS growth.”
  • as WBA’s stock price fell 19% so far this year that means they could buy 23% more shares per dollar spent on share repurchases
  • combine the lower share price with the higher buyback & that would be buying roughly 68.642 million shares instead of 44.092 million shares – an increase of 24.550 million shares – or an increase of 55.679%

On a related note, they also mentioned they saw no need to do any sort of bet-the-company acquisition at any price sort of transformative buying spree, which certainly makes sense given the market’s reaction to recent CVS acquisitions.

I wasn’t sure if the recent results and the deteriorating backdrop of the retail pharmacy industry would change your views on M&A going forward?

No. Our view is still the same. We are not close to any deal provided the price is right. We don’t see any reason to use our cash overpaying for something just because there is a deterioration of the market. If anything, we have to be more careful now when we buy something because if we don’t believe that the market will turn around, we have to action more carefully. Honestly, we still believe in this market. We still believe that this market is a market for the future, a big market with continuous growth, but to buy something, we must be sure that the money that we employ will come back sooner or later.

– Stefano Pessina, Walgreens Boots Alliance Executive Vice Chairman & Chief Executive Officer

Continued Political Gridlock

Political gridlock appears here to stay. Here are a couple “Presidential” tweets from today.

Healthcare has been underperforming on the risk of any sort of price transparency.

“Commercial health-care markets are rife with complex systems of hidden charges and secret discounts. Policy makers, employers and patients are often unable to see clearly which hospital systems and doctor practices are driving high costs. The administration’s vision—which would possibly include fines for noncompliance—is to arm patients with information needed to make health-care decisions much like shopping for other consumer services. Rates potentially could be posted on public websites, where consumers would check the negotiated price of a service before they pick a provider. That, in turn, could lead to lower copays or deductibles. … Some hospital groups and insurers said mandating disclosure of negotiated rates could violate antitrust or contract law and that negotiated rates are proprietary.”

On Twitter yesterday President Trump suggested healthcare reform would happen *after* the 2020 elections.

Everybody agrees that ObamaCare doesn’t work. Premiums & deductibles are far too high – Really bad HealthCare! Even the Dems want to replace it, but with Medicare for all, which would cause 180 million Americans to lose their beloved private health insurance. The Republicans are developing a really great HealthCare Plan with far lower premiums (cost) & deductibles than ObamaCare. In other words it will be far less expensive & much more usable than ObamaCare. Vote will be taken right after the Election when Republicans hold the Senate & win back the House. It will be truly great HealthCare that will work for America. Also, Republicans will always support Pre-Existing Conditions. The Republican Party will be known as the Party of Great HealtCare. Meantime, the USA is doing better than ever & is respected again!

President Donald Trump

Of course his position is ridiculous grandstanding, as he had both branches of Congress for 2 years & other than repealing the Obamacare mandate mostly left healthcare alone. In fact, even the risk of Obamacare being overturned on any level caused the New York Times to publish an article a few years back about how that could adversely impact the McJobs healthcare paperwork jobs engine.

As demands on the system have grown efficiency has went into reverse

“health care has seen an 80% regression in productivity per unit of expense. The only reason this sort of outrageous regression has ever happened in the history of the economic world is fraud, extortion, racketeering and monopolization.”

Karl Denninger

Collectively we are willing to blame anybody but the correct party.

The administration seems less concerned about the effect of foreign drug pricing systems on patients than with their presumed effect on U.S. prices. The president attributes high drug prices to “foreign freeloading.” Americans pay more for drugs, he suggests, because the Greeks pay less.

But if the president is looking for a government to blame for distorted U.S. drug prices, he need look no further than our own. The federal government requires manufacturers to pay rebates, grant discounts, and comply with various price-distorting directives across a range of programs.

Purdue Pharmaceuticals can quietly push assets into different divisions or file for bankruptcy while the Sackler family threatens the press. Even fentanyl from China remains largely unaddressed in spite of the ongoing trade war.

“In China, the law is what Xi Xinping and the Communist Party say it is. If they want to shut down fentanyl producers the ‘law’ is no obstacle – as it would be in the United States. The fact the PRC doesn’t ban fentanyl ‘of any chemical composition’ – much less go after producers the way it goes after Uighurs, Christians, and Falun Gong – once again suggests the CCP is glad America is awash in fentanyl. … Beijing can stop pushing drugs into America. It just needs a reason to do so. It’s past time to give it one.”

Literal chemical warfare and largely, crickets

“The Chinese cops can do whatever they want. There is no Constitution. No 4th Amendment. No 2nd Amendment. No 5th Amendment. The only restraint comes from official CCP desires. What the CCP desires is to flood the United States with fentanyl. Heh, it’s only 70,000 people a year that die here as a result — more deaths than the entire Vietnam war. The Chinese Government is officially responsible, in no small part, for every one of those deaths. This is, simply put, chemical warfare.”

Neither side of the political aisle wants to hand the other a political win on healthcare. Any win would be political red meat & optics matter more than anything.

The Powerful Health Impacts of Eating Red Meats

We are literally seeing the return of medieval diseases.

“Infectious diseases — some that ravaged populations in the Middle Ages — are resurging in California and around the country, and are hitting homeless populations especially hard. Los Angeles recently experienced an outbreak of typhus — a disease spread by infected fleas on rats and other animals — in downtown streets. Officials briefly closed part of City Hall after reporting that rodents had invaded the building.”

Like Trump, Nancy Pelosi is in no rush to fix any of the major issues in healthcare.

Wendell Primus, Pelosi’s longtime health policy aide, wants the White House to agree to a delay in implementation of a sweeping rule to overhaul the drug rebate system, lobbyists and health policy groups said. The proposed rule would prohibit drug manufacturer rebates in Medicare and Medicaid unless they are passed on directly to consumers at the point of purchase.”

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