Walgreens
Boots Alliance issued a disappointing financial report on Thursday morning, with earnings for the most recent quarter that came in lower than expected, and company guidance for next year that’s below Wall Street expectations.
It might not matter much. Walgreens (ticker: WBA), after years of underperformance, announced the appointment of industry veteran Tim Wentworth as its new CEO late Tuesday. The relevance of Thursday’s news seems limited in the face of Wentworth’s impending arrival, and the expected arrival of a replacement for the company’s current interim chief financial officer.
In a note early Thursday, Evercore ISI analyst Elizabeth Anderson, who has an In Line rating on Walgreens stock with a $21 price target, called the results “a bit worse than expectations.”
Earnings for the company’s 2023 fiscal year, which ended on Aug. 31, were $3.98 per share on an adjusted basis, down from $5.04 in 2022 and $4.91 in 2021. Analysts had expected $4 per share, according to FactSet.
Adjusted earnings for the fourth quarter were 67 cents per share, below the 69 cents FactSet consensus estimate. Sales were $35.4 billion, just below the $34.8 billion estimate.
Walgreens issued 2024 adjusted earnings per share guidance of between $3.20 and $3.50, well below the FactSet consensus estimate of $3.71, though what that guidance means ahead of Wentworth’s imminent arrival is hard to say.
Walgreens shares gained 7% Thursday, after falling earlier in the morning.
Wentworth, who will join the company in late October, takes over as the global pharmacy chain is in a tough spot.
Earnings are falling, and are far below targets the executive team laid out two years ago. The company’s core U.S. pharmacy business—-it owns Walgreens and Duane Reade stores in the U.S. and Boots stores overseas—is facing serious challenges. Walgreens also spent heavily on a primary and urgent care chain that won’t be profitable for years.
Shares are down 39.5% this year, despite an extremely high dividend yield of 8.4%, according to FactSet, which some analysts have suggested is unsustainable.
“The company is in a deep hole,” Raymond James analyst John Ransom wrote in a Monday note.
Wentworth, most recently CEO of a
Cigna
(ticker: CI) division that includes its pharmacy benefit manager, was formerly the CEO of Express Scripts, the pharmacy benefit manager that Cigna acquired in 2018.
Over the last five years, Walgreens shares have dropped 70.3% while the broader
S&P 500
has climbed 55.7%.
In a note on Tuesday, shortly ahead of the CEO announcement, Mizuho analyst Ann Hynes, who has a neutral rating on Walgreens, dropped her target price to $25, from $31. J.P. Morgan analyst Lisa Gill, who also has a neutral rating on the stock, cut her target price to $27, from $33, on Oct. 5.
In his note, Raymond James’s Ransom recommended Walgreens end a strategy of retail store leasebacks, which he said previous executives had seen as a “clever way to engineer EPS.” He also said the company needs to reconsider its dividend, and to slow expansion of its new primary care chain. Ransom has a Market Perform rating on Walgreens stock.
Write to Josh Nathan-Kazis at [email protected]
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