Walgreens Boots Alliance slides to a 26-year low after cutting the high end of earnings outlook

Walgreens Boots Alliance (WBA) announced its second-quarter (Feb) earnings. The stock is down 1% in pre-market trade after it cut the high end of its FY24 EPS guidance and announced a $5.8 billion charge from its Village MD acquisition. The stock is down 1% in reaction and is trading at its lowest level since 1998, hovering just above the $20 psyche support area. 

WBA reported adjusted earnings per share (EPS) of $1.20, surpassing the consensus of $0.82 . The company's total sales rose 6.3% year-over-year to $37.05 billion, also exceeding the consensus of $35.86 billion. 

The US Retail Pharmacy segment reported a 4.7% increase in sales to $28.9 billion, retail sales decreased 4.5% and comparable retail sales declined 4.3% compared to the year-ago quarter, reflecting a challenging retail environment and channel shift. 

Pharmacy sales showed significant growth, increasing 8.2% compared to the year-ago quarter. Comparable pharmacy sales increased 8.7% in the quarter, benefiting from higher branded drug inflation and strong execution in pharmacy services. The number of prescriptions filled in the quarter increased 2.6% compared to the prior year, with comparable prescriptions excluding immunizations increasing by 2.9%. 

Walgreens issued in-line guidance for FY24, expecting EPS of $3.20 to $3.35, compared to the consensus of $3.24 and its previous outlook of $3.20-3.50. The company narrowed its adjusted EPS guidance for the fiscal year 2024, reflecting a challenging retail environment in the US, early wind-down of the sale-leaseback program, and lower earnings due to Cencora share sales. These factors were partly offset by the company's execution in pharmacy services and a lower adjusted effective tax rate. 

Walgreens maintained its guidance for US Healthcare adjusted EBITDA to be breakeven at the midpoint of the guidance range of ($50) million to $50 million. The International segment reported a 6.6% increase in sales to $6.0 billion, with the Germany wholesale business growing 5.3% and Boots UK sales growing 3.0%. 

The US Healthcare segment sales increased by 33.2% to $2.2 billion, aided by the acquisition of Summit Health by VillageMD. On a pro forma basis, the segment's businesses grew sales at a combined rate of 14%, with VillageMD and Shields leading the growth. 

Despite the challenges in the retail environment, Walgreens remains confident in achieving its goal of $1 billion in cost savings this year. The company is strategically reviewing its portfolio to ensure it drives growth and delivers value, with its new executive committee focused on operational excellence to power progress and execute the hard work to simplify and strengthen Walgreens Boots Alliance. 

In conclusion , Walgreens Boots Alliance's strong performance in pharmacy sales highlights the resilience of the company's core business, even in the face of a challenging retail environment. The company's guidance for the fiscal year 2024 reflects a cautious outlook, but it remains committed to cost savings, portfolio optimization, and driving growth in its key business segments.