Why has WBA's EPS consistently outperformed forecasts?

Walgreens Boots Alliance (WBA) has reported a robust second-quarter performance with its revenue reaching $38.59 billion, marking a 4.1% increase from the same period last year, beating Wall Street's predictions. Despite a drop in EPS, the company's adjusted earnings per share (EPS) saw a significant decline of 47.5% to $0.63, though it still managed to exceed analyst forecasts. The primary reasons for WBA's EPS consistently outperformed forecasts are as follows: 1. **Revenue Growth**: WBA's revenue growth of 4.1% year-over-year to $38.6 billion reflects a positive performance, especially considering the challenges posed by the retail sector. This increase in sales, particularly in the U.S. Retail Pharmacy segment, contributes to the company's overall financial output, thereby impacting the EPS positively. 2. **Cost Management**: The company's focus on disciplined cost management and improvement in U.S. Healthcare has led to a narrowing of the loss per share to $3.30 compared to $6.85 in the year-ago quarter. This reduction in losses, despite revenue growth, indicates efficient management practices that enhance profitability and, consequently, EPS. 3. **Legal Settlements**: The company has experienced significant legal settlements, which have resulted in continued negative free cash flow. While this might have an indirect impact on profitability, the recognition of such settlements can boost income in a given period, affecting the EPS calculation. 4. **Merger Impact**: WBA's merger with Sycamore Partners has led to the withdrawal of fiscal 2025 guidance. This strategic move might have implications for EPS projections, as the merger dynamics and integration costs can influence short-term financial metrics. In summary, WBA's EPS has outperformed forecasts due to a combination of revenue growth, cost management, legal settlements, and merger-related factors. These elements, either directly or indirectly, contribute to the company's net income, thereby impacting the EPS.