Thursday, October 30th8.7°C
21625
23129

Drugstore chain Walgreen's fiscal 3rd qtr profit jumps 16 pct but misses analyst expectations

Walgreen's fiscal third quarter earnings jumped 16 per cent compared with last year, aided in part by a lower income tax rate, but the drugstore chain's performance again fell short of Wall Street's expectations.

The Deerfield, Illinois, company also left investors and analysts hanging after announcing quarterly results Tuesday. Walgreen executives said they are considering their option to complete a takeover of Swiss health and beauty retailer Alliance Boots — a move that could involve an overseas reincorporation — but they won't be ready to discuss their next step until late July or early August.

For the fiscal third quarter, Walgreen said an increase in foreign income helped knock its tax rate down to 31.5 per cent, compared with 38.7 per cent last year. As a result, the company's income tax provision dropped $43 million in the quarter.

The lower-than-expected tax rate contributed a benefit of at least 8 cents per share toward the company's bottom line, Cantor Fitzgerald analyst Ajay Jain said in a research note that described Walgreen's overall earnings as weak.

Walgreen Co. earned $722 million, or 75 cents per share, in the quarter that ended May 31. That's up from $624 million, or 65 cents per share, a year ago.

Adjusted earnings excluding one-time items totalled 91 cents per share, which was two cents below average analyst expectations. The drugstore chain also fell short in its fiscal second quarter.

Walgreen's revenue climbed 6 per cent to $19.4 billion. Analysts expected $19.44 billion in revenue, according to FactSet.

Walgreen is feeling pressure from both drugmakers who are raising prices and payers like health insurers that are reducing what they will pay for prescriptions, said Vishnu Lekraj, who covers the company for Morningstar.

"They're getting squeezed from both sides, both from the supplier and the customer," he said.

Walgreen acquired an initial 45 per cent stake in Alliance Boots in 2012, and it has an option to buy the rest of the company next year. Alliance Boots runs the largest drugstore chain in the United Kingdom.

Company executives told analysts on Tuesday that they have to consider a host of variables like the deal's capital structure and what it could do for Walgreen's tax rate before they discuss their decision later this summer.

"We are working around the clock to try to understand all the above so that we are able to make the right decision for the company," CEO Greg Wasson said.

Several large U.S. companies have used mergers recently to reincorporate overseas in countries with lower tax rates. These moves are raising concerns among some U.S. lawmakers, since they can cost the federal government billions in tax revenues.

Earlier this month, U.S. medical device maker Medtronic Inc. said that it agreed to buy Ireland-based competitor Covidien for $42.9 billion in cash and stock. The combined company would have its executive offices in Ireland, which has a 12.5 per cent corporate income tax rate.

Another Deerfield company, Horizon Pharma Inc., said in March it would buy the privately held Vidara Therapeutics International Ltd. in a deal that also creates an Ireland-based company.

Walgreen shares slipped 48 cents to $72.25 in midday trading while the Standard & Poor's 500 index climbed slightly.

The Canadian Press


Read more Business News

23015


Recent Trending




Today's Market
S&P TSX14458.69-68.88
S&P CDNX771.65-9.42
DJIA17195.42221.11
Nasdaq4566.138+16.912
S&P 5001994.65+12.35
CDN Dollar0.8936+0.0002
Gold1198.60-0.10
Oil80.73-0.17
Lumber322.40-1.20
Natural Gas3.715+0.066

 
Okanagan Companies
Pacific Safety0.11+0.01
Knighthawk0.01-0.005
QHR Technologies Inc1.150.00
Cantex0.045-0.015
Anavex Life Sciences0.1711-0.0089
Metalex Ventures0.0350.00
Russel Metals32.22-0.35
Copper Mountain Mining1.97-0.05
Colorado Resources0.14+0.005
ReliaBrand Inc0.012-0.004
Sunrise Resources Ltd0.05+0.025
Mission Ready Services0.375+0.005

 



23511

FEATURED Property
21018381145 Felix Road
3 bedrooms 2 baths
$394,495
more details
image2image2image2
Click here to feature your property
Please wait... loading


Empty nesting: financial issues

Now that the children have ‘left the nest’, it is a good time to step back and take stock of your financial situation. Being on your own will probably cut household costs to some extent, b...


Keep your haunted home safe

Eerie sounds, spooky lights and Jack-o’-lanterns aglow—extra efforts at Halloween will keep visitors coming back for both tricks and treats. However, to keep the fun going, it’s imp...


What I learned in China

Photo: ContributedI will never be an expert on China. It is just too big, too complex and too old with layers of history and meaning that would take several lifetimes to unravel. As I said to my hosts...

_








Member of BC Press Council


22632