Commanding a market cap of over $17.68 billion, Walgreens Boots Alliance, Inc. (WBA), a global innovator in retail pharmacy, is slated to disclose its fiscal second-quarter earnings on Thursday, March 28, 2024. Wall Street forecasts for the second quarter results paint a mixed picture.
For instance, WBA’s revenue is anticipated to experience a 2.8% year-over-year rise, reaching $35.83 billion. On the other hand, its EPS is projected to come in at $0.82, registering a 29% year-over-year decline.
While the company's first-quarter top-line and bottom-line figures surpassed analyst projections, its announcement of a significant 48% cut in quarterly dividend payments to $0.25 per share didn't sit well with investors, leading to a sharp decline in its shares. This decision also marks the company's first dividend cut in nearly five decades.
Meanwhile, last month, the Dow Jones Industrial Average (DJIA), one of the oldest and most esteemed stock indexes, commonly known as the Dow, underwent a notable change.
The index, which consists of 30 leading companies, often referred to as blue-chip companies, replaced WBA with the e-commerce behemoth, Amazon.com, Inc. (AMZN). This change occurred as WBA had the lowest stock price among the other constituents of the index.
Shares of WBA have plunged 37.3% over the past year and 22.9% over the past three months to close the last trading session at $20.51.
Here are the fundamental aspects of WBA that could influence its performance in the near term:
Mixed Financials
For the fiscal 2024 first quarter, which ended on November 30, 2023, WBA’s sales increased 9.9% year-over-year to $36.71 billion, whereas its gross profit declined 2.6% from the year-ago value to $6.77 billion.
During the same quarter, the company reported a net loss of $278 million and $0.08 per share. Meanwhile, as of November 30, 2023, its cash and cash equivalents stood at $784 million, increasing 6.1% compared to $739 million as of August 31, 2023.
Mixed Valuation
In terms of forward non-GAAP P/E, WBA is trading at 6.32x, 64.58% lower than the industry average of 17.85x. Likewise, its forward EV/Sales of 0.41x is 75.4% lower than the industry average of 1.69x.
Whereas, the stock’s forward EV/EBITDA multiple of 11.54 is 3.29% higher than the 11.17x industry average. Furthermore, WBA’s forward EV/EBIT multiple of 17.47x is 19.30% higher than the 14.65x industry average.
Mixed Profitability
The stock’s trailing-12-month gross profit and net income margins of 18.88% and 0.40% are 44.8% and 91.8% lower than the 34.22% and 4.92% industry averages, respectively.
On the other hand, WBA’s trailing-12-month asset turnover ratio of 1.49x is 81.1% higher than the 0.82x industry average.
POWR Ratings Exhibit Mixed Prospects
WBA’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, translating to a Neutral in our proprietary rating system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. WBA has a C grade for Value, consistent with its mixed valuation metrics. Moreover, the stock’s C grade for Stability is justified by its 24-month beta of 0.92. Meanwhile, its C grade for Quality is in sync with its mixed profitability metrics.
Within the Medical - Drug Stores industry, WBA is ranked last out of the three stocks.
Beyond what we’ve stated above, we have also rated the stock for Growth, Momentum, and Sentiment. Get all WBA ratings here.
Bottom Line
WBA is currently grappling with a challenging landscape, evident from its lackluster fundamentals. The company's recent setbacks, including its exclusion from the top 30 blue chip companies list and a significant 48% reduction in quarterly dividend payments, have further strained investor faith in its prospects.
On the other hand, the WBA’s strategic move to cut back on dividend payments in order to allocate capital toward growth initiatives could potentially yield long-term benefits for the company and enhance its financial standing.
To that end, as WBA gears up to unveil its second-quarter results tomorrow, it might be best for investors to wait for a more opportune entry point and keep monitoring the stock as opportunities for growth may emerge in the future.
How Does Walgreens Boots Alliance, Inc. (WBA) Stack Up Against Its Peers?
While WBA has an overall grade of C, equating to a Neutral rating, you may also check out these other stocks within the Medical - Consumer Goods industry: Nature's Sunshine Products, Inc. (NATR), LifeVantage Corporation (LFVN), and USANA Health Sciences, Inc. (USNA), carrying A (Strong Buy) ratings. To explore more Medical - Consumer Goods stocks, click here.
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WBA shares were trading at $20.86 per share on Wednesday morning, up $0.35 (+1.71%). Year-to-date, WBA has declined -19.20%, versus a 9.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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