Walgreens Boots Alliance Shares Surge 24% on Better-Than-Expected Q1 Earnings, Sticks to Annual Profit Forecast

Walgreens Boots Alliance, Inc. (Nasdaq: WBA) shares surged 24% on January 10, 2025, following the company's announcement of better-than-expected first quarter fiscal 2025 earnings. The company reported adjusted earnings per share (EPS) of $0.51, beating analysts' estimates of $0.48. Revenue also came in ahead of expectations, increasing 7.5% year-over-year to $39.5 billion. Despite the strong quarterly performance, the company maintained its full-year adjusted EPS guidance of $1.40 to $1.80.



The company's strategic focus on retail pharmacy strengths and store optimization has driven its financial performance. Walgreens Boots Alliance has been executing on its 2025 priorities, which include stabilizing the retail pharmacy by optimizing its footprint, controlling operating costs, improving cash flow, and addressing reimbursement models. The company's turnaround strategy is expected to yield significant financial and consumer benefits over the long term.



Walgreens Boots Alliance's better-than-expected Q1 earnings can be attributed to several key factors:

1. Growth in U.S. Healthcare segment: The U.S. Healthcare segment saw an increase in adjusted EBITDA of $442 million in fiscal 2024, contributing to the overall improvement in earnings. This growth was partly offset by a decline in U.S. Retail Pharmacy and a higher adjusted effective tax rate.
2. Cost savings and working capital initiatives: Walgreens Boots Alliance exceeded its fiscal 2024 targets for cost savings, capital expenditure reduction, and working capital initiatives. These cost-saving measures helped improve the company's financial performance.
3. Net debt and lease obligations reduction: The company achieved a net debt reduction of $1.9 billion and a lease obligations reduction of $1.2 billion in fiscal 2024. This reduction in debt and lease obligations helped improve the company's financial position and contributed to better-than-expected earnings.
4. Footprint optimization program: Walgreens Boots Alliance announced a footprint optimization program targeting approximately 1,200 closures over the next three years, including approximately 500 closures in fiscal 2025. This program is expected to be immediately accretive to adjusted EPS and free cash flow, contributing to the better-than-expected earnings.
5. Improved profitability in U.S. Healthcare segment: The U.S. Healthcare segment saw improved profitability in fiscal 2024, partly offsetting softer U.S. retail and pharmacy performance and lapping the reversal of incentive accruals and prior year sale-leaseback gains.

These factors, along with disciplined execution on cost management, working capital initiatives, and capex reduction, contributed to Walgreens Boots Alliance's better-than-expected Q1 earnings. The company's strategic focus on retail pharmacy strengths and store optimization has positively impacted its financial performance, contributing to cost savings, improved profitability, and growth in key segments. Despite the strong quarterly performance, the company maintained its full-year adjusted EPS guidance, indicating confidence in its ability to deliver on its strategic priorities.