Walgreens Boots Alliance Inc. (NASDAQ:WBA)

Net earnings attributable to Walgreens Boots Alliance, Inc.

The net earnings exhibit volatility over the six-year period. Starting at 1,932 million USD in 2014, there is a significant increase to 4,220 million USD in 2015. This level is mostly sustained through 2016 and 2017, with values of 4,173 and 4,078 million USD respectively. In 2018, net earnings peak at 5,024 million USD, marking the highest point in the period analyzed. However, a decline occurs in 2019, where earnings fall to 3,982 million USD, indicating a downward shift after the 2018 peak.

Net operating profit after taxes (NOPAT)

The NOPAT shows an overall upward trend with some fluctuations. Beginning at 3,086 million USD in 2014, it rises sharply to 5,501 million USD in 2015. After this peak, it dips to 4,855 million USD in 2016, before increasing again in 2017 and 2018 to 5,246 and 5,934 million USD respectively. The highest NOPAT value is recorded in 2018. In 2019, NOPAT slightly decreases to 5,719 million USD but remains close to the peak level, indicating relatively stable operating profitability in recent years compared to net earnings.

Income Tax Provision

The income tax provision exhibited a general downward trend from 2014 to 2019. Beginning at $1,526 million in 2014, the figure decreased steadily through subsequent years, reaching $588 million in 2019. Notably, the most significant decline occurred between 2017 and 2019.

Cash Operating Taxes

Cash operating taxes remained relatively stable between 2014 and 2018, fluctuating within a narrow range from $1,667 million to $1,856 million. However, in 2019, there was a sharp decrease to $831 million, which represents a substantial reduction compared to the previous years.

Overall Observations

Both income tax provision and cash operating taxes showed significant declines by 2019 compared to earlier periods. While income tax provision steadily decreased over the years, cash operating taxes were stable for several years before dropping markedly in the last year observed. These trends may reflect changes in tax policies, operational adjustments, or shifts in taxable income and cash tax payments.

The financial data reveals several notable trends concerning the company's capital structure and invested capital over the six-year period ending in 2019.

Total reported debt & leases

This figure shows an overall increasing trend from 31,909 million USD in 2014 to 43,464 million USD in 2019, with a peak at 46,508 million USD in 2016. After reaching this peak, there is a decline in 2017 to 39,129 million USD, followed by a gradual increase again through 2018 and 2019. This pattern suggests a significant increase in leveraging activities up to 2016, some deleveraging or repayment in 2017, and subsequent additional borrowings or lease liabilities through 2019.

Total shareholders’ equity

Shareholders' equity exhibits a declining trend over the period. Starting at 20,457 million USD in 2014, the equity rose sharply to 30,861 million USD in 2015 but then continuously decreased each year thereafter to 23,512 million USD by 2019. This reduction over time indicates a depletion of equity capital, which could be attributed to factors such as sustained net losses, dividend distributions exceeding net income, share repurchases, or other equity-reducing activities.

Invested capital

The invested capital closely aligns with the combined effect of debt and equity, representing the total capital used in operations. It increased substantially from 55,001 million USD in 2014 to a peak of 85,356 million USD in 2016. Following this peak, invested capital decreased to 76,485 million USD in 2017 and remained relatively stable, with a slight increase, reaching 77,429 million USD by 2019. This behavior suggests expansion or acquisition activity up to 2016, followed by a period of consolidation or capital optimization in subsequent years.

In summary, the company experienced considerable growth in debt financing and invested capital until 2016, accompanied by an initial rise and then a steady decline in shareholders' equity. The data implies a strategic shift post-2016, characterized by deleveraging and stabilization of invested capital, while equity erosion continued, highlighting potential risks related to capital structure and financial sustainability.

Economic Profit Trends

The economic profit has shown a persistent negative trend throughout the analyzed period. Starting at -2313 million USD in 2014, it declined further to reach its lowest point at -3621 million USD in 2016. Thereafter, the negative economic profit gradually improved, reducing in magnitude to -1100 million USD by 2019. This suggests that although the company was generating losses in economic profit consistently, the extent of these losses lessened in the latter years of the period.

Invested Capital Dynamics

Invested capital demonstrated an overall growth trend but with fluctuations. It increased substantially from 55001 million USD in 2014 to a peak of 85356 million USD in 2016, indicating a significant investment expansion up to that year. Subsequently, invested capital declined to 76485 million USD in 2017 and remained relatively stable around the mid-76000 million USD range through 2018 and 2019, showing a stabilization phase after initial growth.

Economic Spread Ratio Performance

The economic spread ratio, reflecting the company's return in relation to its cost of capital, was consistently negative throughout the period. It started at -4.2% in 2014 and exhibited fluctuations, worsening to -4.24% in 2016 before improving steadily to reach -1.42% in 2019. This improvement signals a reduction in the negative value creation relative to capital invested, aligning with the reduced losses observed in economic profit.

Overall Observations

The financial indicators collectively portray a company that has been experiencing economic profit losses across the examined years but has managed to curtail these losses over time. The invested capital expansion until 2016 suggests a period of capital allocation growth, which then stabilized. Concurrently, the improvement in the economic spread ratio implies more efficient management of capital costs over the latter years. These patterns indicate progress toward better capital efficiency and operational improvements, although positive economic profit had not yet been achieved by 2019.

Sales

Sales have shown a consistent upward trend over the six-year period, increasing from $76,392 million in 2014 to $136,866 million in 2019. This represents substantial growth, indicating ongoing expansion or increased market demand. The annual sales growth appears to decelerate slightly in later years, but the overall trajectory remains positive.

Economic Profit

Economic profit remains negative throughout the entire period, signaling that the company has not generated profits above its cost of capital in these years. Although the economic loss deepens from -$2,313 million in 2014 to a peak loss of -$3,621 million in 2016, it improves noticeably thereafter. By 2019, economic losses decrease to -$1,100 million, reflecting progress toward operational efficiency or better capital management.

Economic Profit Margin

The economic profit margin follows a similar pattern to economic profit. Starting at -3.03% in 2014, the margin worsens to -3.09% in 2016, then steadily improves to -0.80% by 2019. This decreasing negative margin suggests incremental improvements in profitability relative to sales, although the company has yet to achieve a positive economic profit margin within the given timeframe.

Overall, the company demonstrates significant sales growth alongside improving but still negative economic profitability metrics. The data points to ongoing efforts to enhance profitability and reduce economic losses while expanding revenue base. Continued focus on operational efficiencies and capital allocation could be key factors driving the observed positive trends in economic profit and margin in recent years.