Walgreens Boots Alliance (WBA) delivered a strong Q1 fiscal 2025 performance, exceeding Wall Street’s expectations on both earnings per share (EPS) and revenue. Adjusted EPS came in at $0.51, significantly above the $0.38 consensus estimate, though down from $0.66 in the same quarter last year. Revenue rose by 7.5% year-over-year to $39.46 billion, comfortably surpassing the $37.34 billion estimate. The strong performance was driven by growth across all segments, including U.S. Retail Pharmacy, U.S. Healthcare, and International sales. Despite these positive results, adjusted gross margin dipped to 17.3%, slightly missing estimates of 17.5% and reflecting ongoing pressures from a competitive pricing environment and higher costs.

The U.S. Retail Pharmacy segment saw sales grow 6.6% year-over-year to $30.87 billion, with comparable sales up 8.5%. Pharmacy sales were particularly strong, increasing by 10.4%, fueled by higher branded drug inflation and prescription volumes. In contrast, retail sales declined by 6.2%, driven by weaker performance in discretionary categories and a softer cold and flu season. The U.S. Healthcare segment impressed with a 12% year-over-year sales increase to $2.17 billion, benefiting from expansion initiatives. International sales surged by 10% to $6.43 billion, with strong contributions from Boots UK, where comparable pharmacy sales rose 10.9% and retail sales grew 8.1%. Boots.com sales jumped 30%, demonstrating robust online demand.

Walgreens’ management maintained its full-year adjusted EPS guidance of $1.40 to $1.80, signaling confidence in its long-term strategy despite challenges in the retail environment. The company emphasized disciplined execution of its 2025 priorities, including optimizing its retail footprint, controlling operating costs, and stabilizing cash flow. CEO Tim Wentworth highlighted the importance of growth in healthcare and international operations to offset weaker retail pharmacy performance. Adjusted operating income for the quarter was $593 million, exceeding the $417.4 million estimate but reflecting a 14% decline year-over-year due to prior-year sale-leaseback gains and rising operational costs.

Shares of WBA rallied by approximately 12% in premarket trading, suggesting renewed investor interest after years of stock price pressure amid concerns over the future of pharmacy benefit managers (PBMs). With the stock trading near $9, some analysts are speculating that this could be an attractive entry point for turnaround investors. The company’s ability to generate revenue growth while managing cost pressures and navigating a challenging retail landscape supports this narrative. Walgreens’ focus on expanding its healthcare segment and leveraging its international operations could offer a path to sustainable growth, making it a stock to watch as it executes its turnaround strategy.