Walgreens Boots Alliance Inc

Walgreens Boots Alliance, Inc. (NASDAQ: WBA) is an integrated healthcare, pharmacy and retailing company. Its segments include U.S. Retail Pharmacy, International, and U.S. Healthcare.

Key Business & Financial Updates

• Fourth Quarter Financial Performance: Walgreens Boots Alliance (WBA) reported a significant fourth-quarter loss per share of USD 3.48, compared to USD 0.21 in the prior-year quarter. The results were impacted by non-cash charges, including valuation allowances on deferred tax assets primarily related to opioid liabilities recognized in prior periods, and impairment charges related to CareCentrix goodwill and equity investments in China. Adjusted earnings per share (EPS) declined to USD 0.39, representing a 40.8% decrease on a constant currency basis, primarily due to reimbursement pressures, the absence of prior-year incentive accrual reversals, and reduced sale-leaseback gains, partially offset by cost savings and growth in the U.S. Healthcare segment. Quarterly sales, however, rose by 6.0% year-over-year to USD 37.5 billion, with a 6.1% increase on a constant currency basis, reflecting broad-based growth across segments.
• Fiscal Year 2024 Results: For the full fiscal year 2024, WBA reported a loss per share of USD 10.01, a significant increase of 180.4% compared to the previous year. This performance was largely attributed to non-cash impairments related to VillageMD goodwill. By contrast, the prior year’s results included significant charges for opioid-related claims and litigation. Adjusted EPS fell to USD 2.88, reflecting a 27.9% decline on a constant currency basis due to a challenging U.S. retail environment, persistent reimbursement pressures, and reduced sale-leaseback gains. Despite these challenges, cost reduction efforts and improved profitability in the U.S. Healthcare segment mitigated the impact. Fiscal year sales grew by 6.2% to USD 147.7 billion, with a 5.7% increase on a constant currency basis, driven by segment-wide revenue growth.
• Operational Highlights: WBA achieved several strategic operational milestones in fiscal 2024. The U.S. Healthcare segment’s adjusted EBITDA increased by USD 442 million, reflecting enhanced performance and cost discipline. The company surpassed its fiscal targets, including USD 1 billion in cost savings, a USD 600 million reduction in capital expenditures, and a USD 500 million improvement in working capital initiatives. Additionally, WBA reduced net debt by USD 1.9 billion and lease obligations by USD 1.2 billion, strengthening its financial position.
• Fiscal 2025 Guidance: Looking ahead, WBA has projected adjusted EPS for fiscal 2025 to range between USD 1.40 and USD 1.80. Growth in the U.S. Healthcare and International segments is expected to offset declines in the U.S. Retail Pharmacy segment, which faces challenges such as higher reimbursement pressures and reduced contributions from sale-leaseback transactions. Furthermore, the company anticipates a higher adjusted effective tax rate and lower earnings from Cencora. These factors make fiscal 2025 a "rebasing year" for WBA, positioning the company for long-term strategic execution.
• Strategic Footprint Optimization: As part of its turnaround strategy, WBA announced a footprint optimization program targeting approximately 1,200 closures over the next three years. The program includes about 500 closures in fiscal 2025 and is expected to be immediately accretive to adjusted EPS and free cash flow. This initiative aims to stabilize the U.S. Retail Pharmacy segment by improving operational efficiency and enhancing financial flexibility.
• Leadership Vision: Tim Wentworth, Chief Executive Officer of WBA, emphasized the company’s focus on stabilizing its retail pharmacy operations through footprint optimization, cost management, and enhanced cash flow. The fiscal 2025 rebasing strategy underscores the company’s commitment to addressing reimbursement challenges, supporting dispensing margins, and preserving patient access. Wentworth expressed confidence in WBA’s long-term growth potential, highlighting the importance of these initiatives in delivering financial and consumer benefits.
• Segment-Specific Performance: The U.S. Retail Pharmacy segment recorded fourth-quarter sales of USD 29.5 billion, a 6.5% increase from the prior-year quarter, driven by higher pharmacy sales. However, retail sales declined by 3.5%, reflecting a challenging retail environment. Adjusted operating income dropped by 60.4% due to reimbursement pressures and the absence of prior-year sale-leaseback gains. Meanwhile, the International segment saw a 3.2% increase in sales to USD 6.0 billion, led by growth in Germany’s wholesale business and Boots UK operations. The U.S. Healthcare segment reported a 7.1% rise in quarterly sales to USD 2.1 billion, supported by growth in VillageMD and Shields, alongside improved cost management. These results underscore WBA’s efforts to navigate a challenging business landscape while positioning itself for future growth.

Technical Observation (on the daily chart):

The Relative Strength Index (RSI) over a 14-day period stands at a value of 35.07, near oversold zone, with the expectations of bullish divergence with expectations of upward momentum if the current important support levels of USD 8.00 holds. Additionally, the stock's current positioning is below both 50-Day SMA and 200-Day SMA, which can act as a short to medium term resistance levels.

As per the above-mentioned price action, momentum in the stock over the last month, current macroeconomic scenarios, recent business & financial updates, and technical indicators analysis, a ‘Buy’ rating has been given to Walgreens Boots Alliance, Inc. (NASDAQ: WBA) at the current market price of USD 8.20 as of November 20, 2024, at 06:40 am PST. 

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is November 20, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.s

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.