Walgreens shares pull back after initial post-earnings gains

  • Walgreens Boots Alliance announces third-quarter results that beat expecations.
  • Walgreens also announces a $10 billion share buyback.
  • The newly named Dow Jones Industrial Average component's stock turns negative after Amazon announces plans to acquire PillPack.

Walgreens Boots Alliance shares sank to a 52-week low Thursday as investors dug into the company's third-quarter earnings results and Amazon announced a potentially disruptive deal.

Shares cratered more than 10 percent in morning trading, at one point hitting a 52-week low of $59.33. Walgreens shares are now down more than 22 percent over the past year. Last September, the stock traded as high as $83.89.

In the latest quarter, the drugstore chain posted revenue of $34.33 billion, topping Thomson Reuters' estimates of $34.05 billion. Net income rose to $1.34 billion, or $1.35 per share, up from $1.16 billion, or $1.08 per share in the period a year ago. After stripping out items, Walgreens earned $1.53 per share beating expectations of $1.48 per share.

The earnings beat, combined with the announcement of a $10 billion share buyback, initially helped boost the new Dow Jones Industrial Average component's stock more than 1 percent in premarket trading. But the stock turned negative as investors dove deeper into the results. Then, after Amazon's plans to acquire online pharmacy PillPack were announced, the stock cratered.

Even without the Amazon announcement, investors were concerned about Walgreens' soft same-store sales numbers, particularly at the front of the store, where the drugstore sells greeting cards, household items and personal care products. But earnings per share were also boosted by stock repurchases the company made, which were larger than analysts expected. Buying back the stock helped lift Walgreens earnings on a per-share basis.

"Man, if you look at the same-store numbers both in the U.S. and the U.K., pharmacy was flat, retail on the front end in the U.S. was down 5 [percent], and the international retail numbers were negative," Raymond James analyst John Ransom told CNBC's "Squawk Box." "Their small wholesale division was the only division that posted positive same-store constant currency."

In the quarter, Walgreens' comparable pharmacy sales in the U.S. were flat compared with the year-earlier quarter. The company said prescription brand inflation was offset by reimbursement pressure and generic drugs.

Comparable retail sales in the U.S. slid 4 percent in the quarter. Drugstores have struggled to keep up as Amazon and other retailers steal away consumers who can find the same items, often at less expensive prices.

Walgreens' gross margin decreased to 22.9 percent in the quarter from 24.2 percent a year earlier, fless than the 23.5 percent expected by analysts polled by FactSet. Its adjusted operating margin dipped to 5.3 percent from 6 percent, shy of the consensus estimate of 5.7 percent.