Analyst Note| Soo Romanoff |
Narrow-moat Walgreens reported fourth-quarter results largely as expected and closed out a challenging fiscal year hampered by the COVID-19 pandemic. Although the challenging market conditions put a pause on many of its partnership initiatives, it also forced the management team to take a closer look at its internal operations with the maximum possible stress testing both domestically and abroad. Normalized earnings of $1.02 were slightly better than the company’s lowered expectations but were approximately 28% below the prior year. All the segments improved from the third-quarter trough and are anticipated to improve slightly in the first half of 2021, before pandemic pressures are anticipated to subside and cost savings and growth initiatives kick in. In light of the interim pause, we have lowered our fair value estimate to $42 per share from $48.