On Thursday, Walgreens Boots Alliance (NASDAQ:WBA) shares experienced a revision in its financial outlook as TD Cowen maintained a Buy rating on the company's stock but lowered the price target to $16 from the previous $22. This adjustment follows a recent meeting between the firm's analysts and Walgreens' senior management, where discussions regarding the company's future were held.
The management team provided updates on several key operational aspects, including an increase in the expected number of store closures, with over 1,000 stores projected to shut down, a significant portion of which is anticipated in fiscal year 2025. Moreover, the company offered insights into their current Contractual Obligation Ratio (COR) negotiations.
Despite the slower timeline for store closures, Walgreens' management expressed confidence in meeting their cash flow obligations for FY25. They highlighted having multiple sources of funds available to meet these commitments. In light of these discussions and the updated closure schedule, TD Cowen now estimates Walgreens' adjusted earnings per share (EPS) for FY25 to be $1.76.
The revised stock price target and maintained Buy rating reflect the analyst's updated expectations based on the information provided by Walgreens' management. The company's strategic decisions, particularly around store closures and financial negotiations, are pivotal factors influencing these projections.
Investors and market watchers will likely monitor Walgreens' progress closely as it navigates the changes within its retail footprint and financial strategies in the coming years, particularly as it approaches the fiscal year 2025.
In other recent news, Walgreens Boots Alliance is set to report its fourth-quarter earnings, with Evercore ISI adjusting its earnings per share estimate to 35 cents, citing better-than-expected National Average Drug Acquisition Cost data. The firm also lowered its price target for Walgreens shares to $7.50, reflecting its updated view on the company's prospects.
Walgreens has also announced strategic partnerships and appointments. The company has teamed up with the Biomedical Advanced Research and Development Authority to advance decentralized clinical trials and has been awarded up to $25 million to conduct a Phase IV observational study on COVID-19 vaccine effectiveness.
In a bid to enhance retail and digital experiences, Walgreens has appointed Tracey Koller as Chief Merchandising Officer and Sharmila Sudhakar as Group Vice President and Head of Digital Commerce.
In financial maneuvers, Walgreens completed a public offering of $750 million in notes with an 8.125% yield, set to mature in 2029. The funds raised may be used for general corporate purposes, including refinancing existing debt or funding capital expenditures.
Lastly, Walgreens has partnered with Instacart (NASDAQ:CART) to allow Supplemental Nutrition Assistance Program beneficiaries to use their Electronic Benefit Transfer payments for online purchases, aiming to improve food access for communities. These are the recent developments from Walgreens.
InvestingPro Insights
As Walgreens Boots Alliance (NASDAQ:WBA) adjusts its financial outlook and operational strategies, recent data from InvestingPro provides a deeper analysis of the company's financial health and market position. With a market capitalization of $7.55 billion, the company's current P/E ratio stands at -1.3, reflecting investor sentiment about its earnings potential. The adjusted P/E ratio for the last twelve months as of Q3 2024 is at -10.17, indicating challenges in profitability.
However, a notable positive is the company's revenue growth, which has increased by 6.92% in the last twelve months as of Q3 2024, with a quarterly growth of 2.64% in Q3 2024. This suggests that despite the hurdles, Walgreens is managing to expand its revenue streams. Moreover, the gross profit margin of 18.38% in the same period signals a solid capability to translate sales into profit.
An InvestingPro Tip highlights the company's significant dividend yield of 11.44%, a compelling factor for income-focused investors. Yet, it is important to consider the substantial dividend growth decline of -47.92% in the last twelve months as of Q3 2024 when evaluating the sustainability of such yields. The recent price performance shows a 1-year total return of -56.75%, underscoring the stock's volatility and the importance of monitoring its trajectory closely.
For those seeking further expert analysis, InvestingPro offers additional tips on Walgreens and other companies, providing a comprehensive toolkit for investors to make informed decisions. In total, there are numerous additional InvestingPro Tips available for subscribers who are considering an investment in Walgreens Boots Alliance or similar companies.
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