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Walgreens Boots Alliance, Inc. (WBA), headquartered in Deerfield, Illinois, is an integrated healthcare, pharmacy, and retail leader serving millions of customers and patients. Valued at $10.50 billion by market cap, the company serves customers in approximately 12,500 locations across the U.S., Europe, and Latin America. It has a presence in eight countries through its consumer brands: Walgreens, Boots, Duane Reade, the No7 Beauty Company, and Benavides in Mexico. The retail pharmacy major is expected to announce its fiscal fourth-quarter earnings for 2024 on Thursday, Oct. 10.
Ahead of the event, analysts expect WBA to report a profit of $0.36 per share on a diluted basis, down 46.3% from $0.67 per share in the year-ago quarter. The company beat the consensus estimates in two of the last four quarters while missing on two other occasions.
For fiscal 2024, analysts expect WBA to report EPS of $2.87, down 27.9% from $3.98 in fiscal 2023.
WBA stock has significantly underperformed the S&P 500’s ($SPX) 14% gains on a YTD basis, with shares down 53.4% during this period. Similarly, it underperformed the S&P 500 Healthcare Sector SPDR’s (XLV) 10.1% gains over the same time frame.
WBA’s underperformance can be attributed to the impact on pharmacies from pharmacy benefit managers (PBMs). PBMs serve as middlemen between health plans and drug manufacturers, negotiate prices with drug companies and set reimbursement rates for pharmacies like WBA. PBMs have been squeezing independent pharmacies on reimbursement rates, and as WBA does not own a major PBM, its margins have been shrinking. The company faces weak demand for Covid products and a challenging macroeconomic environment.
Moreover, its acquisition of primary care clinic chain VillageMD has turned out to be a disaster, as WBA took a $6 billion hit on its investment during Q2. VillageMD has exited 140 locations and announced plans to shut down 160 clinics.
On Jun. 27, WBA shares fell more than 22% after the company reported its Q3 results. Its adjusted EPS of $0.63 fell short of the consensus estimates of $0.67. The company’s revenue of $36.35 billion beat Wall Street expectations of $35.96 billion. WBA now expects adjusted EPS between $2.80 and $2.95, down from the previous forecast of between $3.20 and $3.35. This was the second time that the company had cut EPS guidance.
The company’s management said it was finalizing plans to close hundreds of additional stores over the next three years.
Analysts’ consensus opinion on WBA stock is neutral, with a “Hold” rating overall. Out of 15 analysts covering the stock, two advise a “Strong Buy” rating, 10 recommend a “Hold” rating, one has a “Moderate Sell” rating, and two give a “Strong Sell.” The average analyst price target for WBA is $13.60, indicating an 11.8% potential upside from the current levels.
On the date of publication, Dipanjan Banchur did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
