Company Reports

No-moat Walgreens Boots Alliance reported fiscal second-quarter results that came in higher than our expectations. Total sales of $37.1 billion and adjusted earnings per share of $1.20 were up 6.3% and 3.4% year over year, respectively. After an initial review of the results, we do not expect to make any material changes to our $33 fair value estimate.

No-moat Walgreens posted first-quarter results that were slightly ahead of our expectations. Despite these positive results, the stock was down midsingle digits Jan. 4, which we attribute to the slashed dividend. However, we are maintaining our fair value estimate of $33 per share, and we are maintaining our Standard Capital Allocation Rating on the firm, despite this disappointing move for dividend-focused investors.

Walgreens Boots Alliance is one of the largest retail pharmacy chains in the United States, with over 8,500 locations. Nearly three fourths of Americans live within five miles of a Walgreens location. The company operates in three segments: U.S. retail pharmacy, international, and U.S. healthcare.

No-moat Walgreens Boots Alliance reported weaker-than-expected fiscal fourth-quarter earnings, marking the end of a challenging year. Quarterly sales were up 9.2% year over year, but adjusted EPS of $0.67 fell 18% on constant currency. Walgreens continues to see headwinds in its overall business, including a normalization of respiratory events, lower COVID-19-related contributions (400,000 COVID-19 vaccinations administered in the fourth quarter versus 2.9 million in the prior-year quarter), labor pressures, shifting consumer behaviors, and a challenging macroeconomic environment. While year-over-year comparisons for 2024 appear likely to ease, these challenges may creep into next year, judging by the firm's adjusted 2024 EPS guidance of $3.20-$3.50 compared with 2023’s $3.98. After updating our model for these near-term headwinds, we expect to lower our fair value estimate by a mid-single-digit percentage.

Walgreens Boots Alliance named Tim Wentworth as its new chief executive officer on Oct. 10. Wentworth has decades of experience in healthcare, most recently as the head of Evernorth, Cigna’s pharmacy benefit management and health-services arm. Before that, he was CEO of Express Scripts, the largest pharmacy benefit manager in the United States, and guided that company through the integration with Cigna after its late 2018 acquisition. His appointment will be effective Oct. 23.

Walgreens Boots Alliance is one of the largest retail pharmacy chains in the United States, with over 8,500 locations. Nearly three fourths of Americans live within five miles of a Walgreens location. The company operates in three segments: U.S. retail pharmacy, international, and U.S. healthcare.

No-moat Walgreens Boots Alliance announced Sept. 1. 2023, that Rosalind Brewer has stepped down as chief executive. This move, described by the company as a "mutually agreed" leadership transition, comes as sudden and unexpected. Brewer joined the company in March 2021, making her tenure at Walgreens less than three years, and the stock tumbled roughly 25% since she took on the role. However, we don't necessarily view the stock's underperformance as Brewer's fault. Rather, Walgreens had several hurdles that it has faced since Brewer's tenure at the company, started including a number of COVID-19 waves, reduced pharmacy hours due to worker shortage and shrinkage in its retail pharmacy locations. The company has named Ginger Graham, a longtime board member, as the interim CEO.

Walgreens' fiscal third-quarter results were below our expectations. Total sales were up 8.6% year over year, but the company generated an operating loss against a difficult backdrop of significantly lower demand for COVID-19-related services, price-sensitive consumers, and slower-than-expected profit growth for the U.S. healthcare segment. We have lowered our fair value estimate to $40 per share from $48 to reflect reduced margin expectations for 2023 and beyond as well as a slower ramp-up of the U.S. healthcare business.

Walgreens Boots Alliance is one of the largest retail pharmacy chains in the United States, with over 8,500 locations. Nearly three fourths of Americans live within five miles of a Walgreens location. The company operates in three segments: U.S. retail pharmacy, international, and U.S. healthcare.

Walgreens Boots Alliance reported fiscal 2023 second-quarter results that were slightly better than we anticipated. Sales grew 3.3% year over year, driven by U.S. healthcare and international, with slight offsets from the core pharmacy business. We are maintaining our $48 fair value estimate.

After reviewing our key valuation assumptions, we have maintained our $48 fair value estimate for Walgreens Boots Alliance.

Walgreens Boots Alliance is one of the largest retail pharmacy chains in the U.S. With over 8,500 locations, nearly three-quarter of Americans live within five miles of a Walgreens location. Walgreens operates in three segments: U.S. Retail Pharmacy, International, and U.S. Healthcare.

No-moat Walgreens Boots Alliance reported solid 2023 first-quarter results with sales and EPS mainly in line with our expectations on an adjusted basis. After slight adjustments to our full-year outlook, our assumptions remain in line with guidance, and we are maintaining our $48 fair value estimate. Shares appear undervalued.

Walgreens unit VillageMD has entered a definitive agreement to acquire Summit Health-CityMD, a leading primary, specialty, and urgent care provider. The $9 billion acquisition will be completed by 2023, and Walgreens will invest $3.5 billion through a mix of debt and equity while Cigna-affiliate Evernorth will also invest in the healthcare service operations of Walgreens. Although we have adjusted our Walgreens model to account for this acquisition and management's updated guidance for its long-term healthcare service operations, we are maintaining our no-moat rating and $48 per share fair value estimate on Walgreens.

Although no-moat Walgreens Boots Alliance reported weak fiscal 2022 fourth-quarter results relative to last year, it delivered ahead of fiscal-year expectations. We plan to mildly adjust our long-term assumptions to better account for likely growth in the U.S. healthcare segment but expect to maintain our $48 fair value estimate at first glance. The shares appear significantly undervalued to us.

Founded in 1901, Walgreens Boots Alliance is a leading global retail pharmacy chain. In fiscal 2021, the company generated approximately $133 billion in revenue and dispensed over a billion prescriptions annually, representing just under one fourth of the U.S. drug market. The firm's nearly 9,000 domestic stores are strategically located in high-traffic areas and generate over $13 million per store, which drives scale and remains a critical consideration in an increasingly competitive market that has witnessed rationalization. The core business is centered on the pharmacy, which accounts for about three fourths of revenue and is considered the main driver of traffic.

Although no-moat Walgreens reported weak fiscal third-quarter results relative to last year's strong quarter that included many COVID-19 tailwinds, we are maintaining our $48 fair value estimate. Shares appear moderately undervalued below $40 per share.

Founded in 1901, Walgreens Boots Alliance is a leading global retail pharmacy chain. In fiscal 2021, the company generated approximately $133 billion in revenue and dispensed over a billion prescriptions annually, representing just under one fourth of the U.S. drug market. The firm's nearly 9,000 domestic stores are strategically located in high-traffic areas and generate over $13 million per store, which drives scale and remains a critical consideration in an increasingly competitive market that has witnessed rationalization. The core business is centered on the pharmacy, which accounts for about three fourths of revenue and is considered the main driver of traffic.

In a news release issued today, no-moat Walgreens announced that it had reached a $683 million settlement agreement with Florida to resolve outstanding claims against the company's role in distributing and dispensing prescription opioid medications in the state. The net settlement amount is composed of $620 million to be paid over an 18-year period, in addition to $63 million upfront in attorney fees. We expect to publish an updated discounted cash flow model shortly, taking the impact of these cash outflows into account. Because of the long horizon over which the settlement is to be paid, the annualized settlement amount ($34 million/year) should not have a material impact on free cash flow to the firm or impact the company's ability to fund its healthcare services growth initiatives. Therefore, we do not expect a revision to our $48 per share fair value estimate.

No-moat Walgreens reported a strong second quarter above consensus expectations, with sales and adjusted earnings per share up 3.8% and 26.5%, respectively, year over year on a constant-currency basis. Despite this, the shares dipped following the earnings release, largely because of negative investor sentiment with regard to expectations for a comparatively weaker back half of the year. However, our long-term assumptions are unchanged, and we maintain our $48 fair value estimate.