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However, the analysts noted that retail and U.S. health is unlikely to impact the company’s guidance.
“We are lowering our F2023 Retail EBIT estimate by $143M to $4.16B due to lower assumed COVID earnings (-$150M vs. prior estimate), and 340B pressure (-$100M), while adding back ~$100M for increased RE sale-leaseback gains,” explained the analysts.
“Our COVID assumption is now in-line with the CVS retail segment, where the latest guidance assumes COVID earnings decline ~75% y/y, along with a 340B cut of $100M ($200M annualized, or roughly 20% of estimated gross 340B gross profit).”
The analysts also said the firm is cutting its F2023 U.S. Health EBIT estimate for WBA “by $207M to ($467M) to account for a slower ramp in VillageMD/Summit Health earnings in F2H23 given the weak F1H23 trends and the sluggish Sept. 2022 quarterly Summit/City EBITDA of only $17M.”
“We don’t see the building blocks for the assumed back half ramp, given that all of the pieces were present in the Feb. quarter ex-1 month of Summit/City,” they concluded.
