It has been about a month since the last earnings report for Walgreens Boots Alliance (WBA). Shares have lost about 18.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Walgreens due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Walgreens Boots Surpasses Q4 Earnings and Revenues Estimates
Walgreens Boots Alliance, Inc. delivered adjusted earnings per share of 39 cents in the fourth quarter of fiscal 2024, down 41.8% from the year-ago quarter’s figure (down 40.8% at constant exchange rate or CER). However, the figure topped the Zacks Consensus Estimate by 8.3%.
GAAP loss per share for the fourth quarter was $3.48, wider than the year-ago quarter’s 21 cents loss.
For the full year, adjusted earnings per share was $2.88, a 27.6% decline from fiscal 2023 (down 27.9% at CER). This exceeded the Zacks Consensus Estimate by 1.1%.
Following the earnings announcement, WBA stock gained nearly 7% in the pre-market trading today.
WBA’s Revenues in Q4 and Fiscal 2024
Walgreens Boots recorded total sales of $37.55 billion in the fiscal fourth quarter, up 6% year over year and 6.1% at CER. The top line also surpassed the Zacks Consensus Estimate by 5.1%.
Total revenues for fiscal 2024 were $147.66 billion, up 6.2% from the year-ago period (up 5.7% at CER). This topped the Zacks Consensus Estimate by 1.2%.
Segmental Insights of WBA’s Q4 Revenues
The company currently operates its business through three reportable segments: U.S. Retail Pharmacy, International, and U.S. Healthcare.
U.S. Retail Pharmacy
The segment’s sales increased 6.5% year over year to $29.5 billion in the fiscal fourth quarter. Comparable sales jumped 8.3% from the year-ago quarter’s levels. Pharmacy sales were up 9.6% from the year-ago quarter’s figures, and comparable pharmacy sales increased 11.7%, each benefiting from higher brand inflation and mix impacts. Retail sales fell 3.5%, and comparable retail sales were down 1.7% year over year, reflecting a challenging retail environment and a continued channel shift.
International
Revenues in the International division rose 3.2% on a year-over-year basis and increased 3.7% at CER to $6 billion in the fiscal fourth quarter. In Germany, wholesale business sales increased 8.2% in the fiscal fourth quarter. Boots UK sales rose 2.3% year over year. Boots UK’s comparable retail sales advanced 6.2%. Further, Boots UK’s comparable pharmacy sales rose 10% year over year.
U.S. Healthcare
U.S. Healthcare reported fiscal fourth-quarter revenues of $2.1 billion. The metric was up 7.1% from the year-ago quarter’s levels. Within the segment, the Shields business rose 27.8%, driven by the growth within existing partnerships. VillageMD jumped 7.2%, reflecting additional risk lives and fee-for-service revenue.
WBA’s Q4 Margin Performance
The gross profit in the reported quarter fell 3.4% year over year to $6.25 billion on an 8.1% rise in the cost of sales. The gross margin contracted 163 basis points to 16.7%.
Selling, general and administrative expenses fell 0.6% year over year to $6.95 billion. The company reported an adjusted operating loss of $695 million for the quarter compared with the year-ago period’s loss of $516 million.
WBA’s Liquidity & Cash Flow Position
Walgreens Boots exited the fourth quarter of fiscal 2024 with cash and cash equivalents of $1.32 billion compared with $728 million recorded in the fiscal 2023 end.
The total debt was $9.54 billion compared with $9.06 billion a year ago.
The cumulative cash used by operating activities at the end of the fourth quarter of fiscal 2024 was $1.02 billion compared with the year-ago period’s cash inflow of $2.26 billion.
A Look Into WBA’s Fiscal 2025 Expectations
The company provided its financial outlook for fiscal 2025.
Walgreens Boots anticipates full-year revenues to be between $147 billion to $151 billion. The Zacks Consensus Estimate for WBA’s fiscal 2025 revenues is pegged at $145.85 billion.
Adjusted earnings is projected in the range of $1.40-$1.80 per share The company expects growth in the U.S. Healthcare and International segments to be more than offset by a decline in U.S. Retail Pharmacy, a higher adjusted effective tax rate and reduced contributions from sale-leaseback and Cencora earnings. The Zacks Consensus Estimate for the company’s fiscal 2025 earnings currently stands at $2.85 per share.
WBA’s New Strategic Action
Walgreens Boots announced a new footprint optimization program targeting approximately 1,200 closures over the next three years. This includes nearly 500 closures in fiscal 2025, which will be immediately accretive to adjusted earnings per share and free cash flow.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
The consensus estimate has shifted -16.19% due to these changes.
VGM Scores
Currently, Walgreens has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Walgreens has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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