Walgreens Boots Alliance, Inc. (WBA) is scheduled to release its fiscal 2024 first quarter financial results on January 4. Wall Street anticipates the company to generate $35.04 billion in revenue, indicating a 5% year-over-year rise. However, the company’s EPS is expected to decline 44.7% from the prior year’s period to $0.64.

Despite WBA’s solid assets and brand legacy, its past-year performance did not reflect well on its commitment. In six weeks, the company realigned its cost structure, planning cost reductions of over $1 billion and cutting capital expenditures by around $600 million, aiming to enhance business performance and fiscal efficiency.

The company foresees the effects of its recent actions in fiscal 2024, commencing in the second quarter. WBA expects an adjusted EPS range of $3.20 to $3.50 for the fiscal year, attributing this to increased cost savings throughout the business and enhanced profitability in U.S. healthcare.

Additionally, on November 30, WBA introduced the Rx Savings Finder, a user-friendly digital tool aimed at aiding customers in saving on prescription medications. The tool locates free third-party discount cards, offering patients a convenient means to discover lower prices on Walgreens medications.

By streamlining the search across various discount card websites, WBA would save patients’ time, cut the costs of crucial medications and ease the workload for pharmacists, marking a significant stride that could contribute positively to the company’s growth trajectory.

Moreover, on November 9, WBA announced the sale of Cencora, Inc. common stock through variable prepaid forward transactions, yielding around $424 million with potential additional proceeds at maturity. The proceeds are earmarked for debt reduction and general corporate purposes.

Shares of WBA have gained 28.3% over the past month to close the last trading session at $26.11.

Here are the financial aspects of WBA that could influence its performance in the near term:

Mixed Financials

For the fiscal 2023 fourth quarter that ended August 31, 2023, WBA’s sales increased 9.2% year-over-year to $35.42 billion. Its gross profit grew 1% from the year-ago value to $6.48 billion. In addition, as of August 31, 2023, the company’s total assets came in at $96.63 billion, compared to $90.12 billion as of August 31, 2022.

However, adjusted net earnings attributable to WBA and adjusted net earnings per common share decreased 17.1% and 16.3% from the prior year’s period to $575 million and $0.67, respectively.

Mixed Growth Record

Over the past five years, WBA’s revenue increased at a CAGR of 4.5%. In addition, its total assets grew at a CAGR of 3.5%. However, the company’s EBITDA and normalized net income declined at a CAGR of 5.6% and 4.9%, respectively, over the same time frame.

Mixed Analyst Estimates

The consensus revenue estimate of $143.10 billion for the fiscal year ending August 2024 reflects a 2.9% year-over-year improvement. However, for the same period, the company’s EPS is expected to decrease 16.2% from the previous year to $3.33.

Discounted Valuation

In terms of forward non-GAAP P/E, WBA is trading at 7.83x, 57.2% lower than the industry average of 18.31x. Its forward EV/Sales of 0.45x is 73.3% lower than the 1.70x industry average. Moreover, the stock’s forward Price/Sales of 0.16x is 86.5% lower than the 1.16x industry average.

Mixed Profitability

The stock’s trailing-12-month gross profit margin of 19.46% is 42.6% lower than the industry average of 33.89%. Its trailing-12-month EBITDA margin of 2.95% is 73.8% lower than the 11.26% industry average.

However, the stock’s trailing-12-month asset turnover ratio and trailing-12-month cash from operations of 1.49x and $2.26 billion are 78.4% and 214.1% higher than the industry averages of 0.84x and $719 million, respectively.

POWR Ratings

WBA’s outlook is apparent in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different 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 B grade for Value, which is in sync with its lower-than-industry valuation. In addition, the stock has a C grade for Quality, which is consistent with its mixed profitability scenario.

WBA is ranked last in the 3-stock Medical – Drug Stores industry. Click here to access WBA’s Growth, Momentum, Stability, and Sentiment ratings.

Bottom Line

WBA is facing challenges despite solid assets and a brand legacy. The recent strategic actions, including cost reductions and the Rx Savings Finder launch, indicate efforts to enhance the company’s fiscal efficiency and customer value. In addition, the sale of Cencora stock aims to strengthen finances.

However, with mixed financials and valuation, investors might want to consider waiting for a more favorable entry point in WBA.

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 check out these other A (Strong Buy) and B (Buy) stocks within the Medical – Consumer Goods industry: USANA Health Sciences, Inc. (USNA), Nature’s Sunshine Products, Inc. (NATR) and LifeVantage Corporation (LFVN). To explore more Medical – Consumer Goods stocks, click here.

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WBA shares were trading at $26.87 per share on Tuesday afternoon, up $0.76 (+2.91%). Year-to-date, WBA has gained 2.91%, versus a -0.42% rise in the benchmark S&P 500 index during the same period.

About the Author: Aanchal Sugandh

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More...

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