icon
icon
icon
icon
Upgrade
upgrade
Walgreens Boots Alliance Reports Q1 Loss, Cuts Dividend, and Maintains FY Guidance
AInvestThursday, Jan 4, 2024 7:56 am ET
2min read
WBA --

Walgreens Boots Alliance (WBA) announced its first-quarter results, beating earnings estimates and reporting strong sales growth in both the United States and international markets. The company also provided its year forecast and made some important announcements regarding plans and dividend payments. 

In terms of earnings, WBA reported adjusted earnings per share (EPS) of 66 cents, surpassing the estimated 62 cents. This represents a decrease of 43.1 percent compared to the previous year on a constant currency basis. The decline can be attributed to challenging retail market trends in the U.S. and a higher tax rate. However, the overall performance was better than expected. 

On the sales front, the company reported total sales of $36.71 billion for the first quarter, exceeding the estimated $35.04 billion. This marks a 10.0 percent increase year-over-year, or 8.7 percent on a constant currency basis. The growth was driven by strong performance in the U.S. Retail Pharmacy and International segments. 

The U.S. Retail Pharmacy segment recorded sales of $28.9 billion, representing a 6.4 percent increase from the previous year. Comparable sales also showed a positive trend, increasing by 8.1 percent. The International segment reported sales of $5.8 billion, reflecting a substantial growth of 12.4 percent compared to the year-ago quarter. This growth was partially boosted by an 8.0 percent favorable currency impact. On a constant currency basis, sales increased by 4.4 percent, with Boots UK sales growing by 6.2 percent and the Germany wholesale business increasing by 3.7 percent. 

WBA maintains its adjusted FY24 EPS guidance of $3.20 to $3.50, despite the challenging retail market trends and higher tax rate impacting its earnings. The company expects underlying earnings growth to be offset by lower sales and leaseback contribution as well as lower COVID-19 contribution. WBA aims to maintain U.S. Healthcare adjusted EBITDA at breakeven, with a midpoint guidance range of ($50) million to $50 million. 

Additionally, WBA made an important announcement regarding its dividend payment. The company will be reducing its quarterly dividend by 48 percent to 25 cents per share. This decision reflects the companys strategy to prioritize investments and allocate capital effectively for future growth. The dividend cut had been expected as the company's 7%+ dividend yield was viewed as unsustainable given market conditions. 

The stock is up 4% following the news. The price action may come as a surprise given the dividend cut but we would reiterate that this cut was widely expected. The small top and bottom line beat and reaffirmation of the FY24 outlook are encouraging. This marks the first earnings report under new CEO Tim Wentworth. Investors will be encouraged by the initial results. In 2023, WBA was the worst performing Dow component as it declined -26% for the year. This sets it up as a "Dog of the Dow" name and one we would have on the radar for a longer term swing long. 

In summary, Walgreens Boots Alliance delivered strong first-quarter results, exceeding earnings and sales estimates. The company remains optimistic about its full-year outlook, despite ongoing challenges in the retail market. With a focus on managing its capital effectively and investing for future growth, WBA continues to prioritize long-term sustainability and value creation.

$WBA(WBA)

Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.