WBA Stock Up on Q4 Earnings & Revenues Beat, Unveils Strategic Action

Walgreens Boots Alliance, Inc. WBA delivered adjusted earnings per share (EPS) of 39 cents in the fourth quarter of fiscal 2024, down 41.8% from the year-ago quarter’s figure (down 40.8% at constant exchange rate or CER). However, the figure topped the Zacks Consensus Estimate by 8.3%.

GAAP loss per share for the fourth quarter was $3.48, wider than the year-ago quarter’s 21 cents loss.

For the full year, adjusted EPS was $2.88, a 27.6% decline from fiscal 2023 (down 27.9% at CER). This exceeded the Zacks Consensus Estimate by 1.1%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Following the earnings announcement, WBA stock gained nearly 7% in the pre-market trading today.

WBA’s Revenues in Q4 and Fiscal 2024

Walgreens Boots recorded total sales of $37.55 billion in the fiscal fourth quarter, up 6% year over year and 6.1% at CER. The top line also surpassed the Zacks Consensus Estimate by 5.1%.

Total revenues for fiscal 2024 were $147.66 billion, up 6.2% from the year-ago period (up 5.7% at CER). This topped the Zacks Consensus Estimate by 1.2%.

Segmental Insights of WBA’s Q4 Revenues

The company currently operates its business through three reportable segments: U.S. Retail Pharmacy, International, and U.S. Healthcare.

U.S. Retail Pharmacy

The segment’s sales increased 6.5% year over year to $29.5 billion in the fiscal fourth quarter. Comparable sales jumped 8.3% from the year-ago quarter’s levels.

Pharmacy sales were up 9.6% from the year-ago quarter’s figures, and comparable pharmacy sales increased 11.7%, each benefiting from higher brand inflation and mix impacts.  

Retail sales fell 3.5%, and comparable retail sales were down 1.7% year over year, reflecting a challenging retail environment and a continued channel shift.

International

Revenues in the International division rose 3.2% on a year-over-year basis and increased 3.7% at CER to $6 billion in the fiscal fourth quarter.

In Germany, wholesale business sales increased 8.2% in the fiscal fourth quarter.

Boots UK sales rose 2.3% year over year. Boots UK’s comparable retail sales advanced 6.2%. Further, Boots UK’s comparable pharmacy sales rose 10% year over year.

U.S. Healthcare

U.S. Healthcare reported fiscal fourth-quarter revenues of $2.1 billion. The metric was up 7.1% from the year-ago quarter’s levels.

Within the segment, the Shields business rose 27.8%, driven by the growth within existing partnerships. VillageMD jumped 7.2%, reflecting additional risk lives and fee-for-service revenue.

WBA’s Q4 Margin Performance

The gross profit in the reported quarter fell 3.4% year over year to $6.25 billion on an 8.1% rise in the cost of sales. The gross margin contracted 163 basis points to 16.7%.

Selling, general and administrative expenses fell 0.6% year over year to $6.95 billion.

The company reported an adjusted operating loss of $695 million for the quarter compared with the year-ago period’s loss of $516 million.

WBA’s Liquidity & Cash Flow Position

Walgreens Boots exited the fourth quarter of fiscal 2024 with cash and cash equivalents of $1.32 billion compared with $728 million recorded in the fiscal 2023 end.

The total debt was $9.54 billion compared with $9.06 billion a year ago.

The cumulative cash used by operating activities at the end of the fourth quarter of fiscal 2024 was $1.02 billion compared with the year-ago period’s cash inflow of $2.26 billion.

A Look Into WBA’s Fiscal 2025 Expectations

The company provided its financial outlook for fiscal 2025.

Walgreens Boots anticipates full-year revenues to be between $147 billion to $151 billion. The Zacks Consensus Estimate for WBA’s fiscal 2025 revenues is pegged at $145.85 billion.

Adjusted EPS is projected in the range of $1.40-$1.80. The company expects growth in the U.S. Healthcare and International segments to be more than offset by a decline in U.S. Retail Pharmacy, a higher adjusted effective tax rate and reduced contributions from sale-leaseback and Cencora earnings.

The Zacks Consensus Estimate for the company’s fiscal 2025 earnings currently stands at $2.85 per share.

WBA’s New Strategic Action

Walgreens Boots announced a new footprint optimization program targeting approximately 1,200 closures over the next three years. This includes nearly 500 closures in fiscal 2025, which will be immediately accretive to adjusted EPS and free cash flow.

Our Take on WBA

Walgreens Boots closed the fourth quarter of fiscal 2024 with better-than-expected earnings and revenues. The company exceeded its fiscal 2024 targets for $1 billion in cost savings, a $600 million reduction in capital expenditures, and $500 million in working capital initiatives.

On the flip side, the bottom line was down year over year, due to a challenging U.S. retail environment, net reimbursement pressure, lower sale-leaseback gains, and lapping the reversal of incentive accruals in the prior year. The contraction of gross margin and a wider adjusted operating loss in the quarter is discouraging.

WBA’s Zacks Rank & Key Picks

Walgreens Boots currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks from the broader medical space are Phibro Animal Health PAHC, Veracyte VCYT and HealthEquity HQY.

Phibro Animal Health, sporting a Zacks Rank #1 (Strong Buy), reported fourth-quarter fiscal 2024 adjusted earnings of 41 cents per share, which topped the Zacks Consensus Estimate by 20.6%. Revenues of $273.2 million beat the Zacks Consensus Estimate by 4.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

PAHC’s fiscal 2025 earnings are expected to surge 30.3% compared with the industry’s 11.7%. The company’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 4.1%.

Veracyte, also sporting a Zacks Rank #1, posted second-quarter 2024 earnings of 30 cents per share against the Zacks Consensus Estimate of a 3-cent loss. Revenues of $114.4 million surpassed the Zacks Consensus Estimate by 14%.

VCYT has an estimated 2024 earnings growth rate of 113.7% compared to the industry’s 13.7%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 328.4%.

HealthEquity, carrying a Zacks Rank #2 (Buy), reported a second-quarter fiscal 2025 adjusted earnings of 86 cents per share, which surpassed the Zacks Consensus Estimate by 22.9%. Revenues of $299.9 million topped the Zacks Consensus Estimate by 5.4%.

HQY has an estimated long-term earnings growth rate of 28.2% compared with the industry’s 13.6% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 19.8%.

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