Walgreens Boots Alliance released a disappointing financial report Thursday morning. Earnings for the latest quarter came in lower than expected and company forecasts for next year fell short of Wall Street’s expectations.
It might not matter much. Walgreens (ticker: WBA) announced late Tuesday the appointment of industry veteran Tim Wentworth as its new CEO after years of underperformance. The relevance of Thursday’s news appears to be limited given the impending arrival of Wentworth and the expected arrival of a replacement for the company’s current interim chief financial officer.
In a note early Thursday, Evercore ISI analyst Elizabeth Anderson, who has an in-line rating on Walgreens shares with a $21 price target, called the results “slightly worse than expected.”
Profit for the company’s fiscal 2023 ended Aug. 31 was $3.98 per share on an adjusted basis, down from $5.04 in 2022 and $4.91 for the year 2021. Analysts had expected $4 per share, according to FactSet.
Adjusted fourth-quarter earnings were 67 cents per share, below the FactSet consensus estimate of 69 cents. Revenue was $35.4 billion, just below the $34.8 billion estimate.
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Walgreens issued 2024 adjusted earnings per share guidance of between $3.20 and $3.50, well below the FactSet consensus estimate of $3.71, although it’s hard to say what that will be Forecast ahead of Wentworth’s impending arrival means.
Walgreens shares were up 2.4% as of 9:34 a.m. Thursday after falling earlier in the morning.
Wentworth, who will join the company at the end of October, takes the reins as the global pharmacy chain finds itself in a difficult position.
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Revenues are falling and are well below the goals the management team set two years ago. The company’s core U.S. pharmacy business — it owns Walgreens and Duane Reade stores in the U.S. as well as Boots stores abroad — is facing major challenges. Walgreens also spent heavily on a primary and urgent care chain that won’t be profitable for years.
Shares are down 39.5% this year, according to FactSet, despite an extremely high 8.4% dividend yield that some analysts say is unsustainable.
“The company is in a deep hole,” Raymond James analyst John Ransom wrote in a note Monday.
Wentworth, most recently CEO of a division of Cigna (ticker: CI) that includes pharmacy benefit manager, was previously CEO of Express Scripts, the pharmacy benefit manager that Cigna acquired in 2018.
Over the past five years, Walgreens shares have fallen 70.3% in total value
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The S&P 500 is up 55.7%.
In a note Tuesday, shortly before the CEO’s announcement, Mizuho analyst Ann Hynes, who has a neutral rating on Walgreens, lowered her price target to $25 from $31. JP Morgan analyst Lisa Gill, who also has a neutral rating on the stock, lowered her price target to $27 from $33 on Oct. 5.
In his memo, Raymond James Walgreens’ Ransom recommended abandoning its strategy of leasing back retail stores, which he said previous executives had viewed as a “smart way to develop EPS.” He also said the company needed to reconsider its dividend and slow the expansion of its new primary supply chain. Ransom has a Market Perform rating on Walgreens shares.
Write to Josh Nathan-Kazis at [email protected]