Walgreens Boots Alliance, Inc. (WBA) reported mixed fiscal 2024 third-quarter results. The pharmaceutical chain’s Q3 earnings missed Wall Street estimates while revenue surpassed consensus. The company also lowered its projected adjusted earnings outlook for fiscal year 2024. Furthermore, while revealing new cost-cutting measures, Walgreens stated that it is downsizing US stores that have been underperforming for several years. The stock of Walgreens ended Friday’s trading session at $12.10, down $0.09, or 0.78%, from the prior close.
The Deerfield, Illinois-based Company reported third-quarter revenues of $36.35 billion, an increase of 2.60% from $35.42 billion in a similar quarter last year.
For the third quarter, which ended May 31, 2024, Walgreens recorded net income of $344 million, or $0.40 per share, up from $118 million, or $0.14 per share, in the quarter ended May 31, 2023.
Excluding impairment of goodwill, intangibles, and long-lived assets, acquisition-related costs, acquisition-related amortization, certain legal and regulatory accruals and settlements, transformational cost management, and adjustments to equity earnings in Cencora, among others, Walgreens posted Q3 2024 non-GAAP earnings of $545 million, or $0.63 per share, down from $860 million, or $1 per share, in Q3 2023.
Analysts polled by LSEG expected Walgreens Boots Alliance to announce earnings of $0.68 per share with revenues totaling $35.94 billion.
Commenting on the quarterly results, WBA CEO, Tim Wentworth, stated “We continue to face a difficult operating environment, including persistent pressures on the U.S. consumer and the impact of recent marketplace dynamics which have eroded pharmacy margins.”
Segment wise:
- US Retail Pharmacy revenue rose by 2.30% y-o-y to $28.50 billion, surpassing FactSet estimates of $28.34 billion.
- International revenues were $5.73 billion in 3Q 2024, up from $5.57 billion last year.
- US Healthcare revenues were $2.13 billion, an increase of 7.60% on a y-o-y basis and surpassing forecasts of $2.08 billion.
The company stated that pharmacy sales grew by 4.40% y-o-y in 4Q 2024. Likewise, comparable pharmacy sales rose by 5.70% y-o-y in the same period. The increase was led by price inflation for brand medications and prescription growth.
Notably, including vaccines, aggregate prescriptions filled in the quarter were 306.40 million, up 0.50% from 3Q 2023.
Furthermore, Walgreens Boots Alliance stated that it intends to close approximately 650 to 700 stores in the US that are performing below par following a reduction in its profit outlook for FY 2024 due to sluggish consumer spending impacting retail operations.
Additionally, Walgreens intends to close up to 650 Boots shops in the UK, anticipating related pre-tax fees in the range of $3.8 billion to $4.1 billion, as stated in a regulatory filing. The company will also streamline its U.S. healthcare portfolio, which encompasses the primary care provider VillageMD.
Despite these changes, Walgreens stated that it will continue to invest in Boots UK in addition to Shields pharmacy operations. At the end of May 31, as per the filing, Walgreens had shut down 581 stores in the UK and 673 stores in the U.S.
Looking forward, the company did not issue a fresh revenue forecast for FY 2024. In October 2023, Walgreens projected FY 2024 revenues in the range of $141 billion to $145 billion.
Walgreens now anticipates FY 2024 non-GAAP earnings in the range of $2.80 to $2.95 per share. Previously, the company stated that it expects non-GAAP earnings in the range of $3.20 to $3.35 per share. Analysts surveyed by LSEG anticipate the company to post adjusted earnings of $3.20 per share.
The quarterly earnings miss and downward revision of FY 2024 adjusted earnings are expected to keep the stock of Walgreens slightly bearish in the short term.
The historical price chart indicates that the stock of Walgreens has broken the support level at $15. The next major support is anticipated to be only near $10. Additionally, the stock is trading below its 50-day moving average, while the stochastic RSI is in the bearish zone. Therefore, we anticipate Walgreens’ stock to remain in a downtrend for the next few trading sessions.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
