Shares of Walgreens Boots Alliance (NASDAQ: WBA) fell sharply final yr as a mixture of declining vaccine demand, headwinds on client discretionary spending, and misguided acquisitions led to a sequence of dismal earnings studies from the corporate.
Consequently, Walgreens was compelled to chop its dividend, took a multibillion-dollar impairment cost, and misplaced its place within the Dow Jones Industrial Common (DJINDICES: ^DJI). In response to information from S&P Global Market Intelligence, the inventory fell 64% over the course of 2024. As you may see from the chart, the inventory fell steadily over a lot of the yr as its prospects continued to say no.
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Why Walgreens collapsed
Walgreens fell steadily by way of the primary three quarters of the yr as the corporate missed estimates and reduce steering, and Wall Road’s view of the inventory soured. By the fourth quarter, the inventory appeared to stabilize, but it surely had but to point out indicators of restoration.
The lowlights began early for Walgreens, because it stated it was chopping its dividend early in January when it reported first-quarter earnings. The corporate slashed its dividend by 48% to $0.25 1 / 4, which it stated was a part of a give attention to right-sizing prices and growing money circulate. It additionally maintained its adjusted earnings per share steering on the time at $3.20-$3.50.
Within the second-quarter report, out on the finish of March, Walgreens dropped one other bomb on buyers, taking a $5.8 billion goodwill impairment on VillageMD. It acquired the first care and pressing care enterprise as a option to diversify and vertically combine, but it surely’s turn out to be clear that it significantly overpaid the enterprise. Walgreens paid $5.2 billion in 2021 to extend its stake in VillageMD from 30% to 63%, although its development technique within the enterprise didn’t pan out. It additionally narrowed its adjusted EPS steering to $3.20-$3.35 within the quarter.
Walgreens’ worst day of the yr got here on June 27, when the inventory fell 22% on one other disappointing earnings report. This time, it slashed its full-year EPS steering to $2.80-$2.95 on account of difficult pharmacy trade developments and a weak client surroundings.
Picture supply: Getty Photographs.
What’s subsequent for Walgreens?
Virtually all the things that might go mistaken for Walgreens final yr did, but it surely confirmed indicators of restoration in its first-quarter earnings report earlier this month. Whereas administration expects adjusted earnings per share of simply $1.40-$1.80 this yr, the enterprise has appeared to stabilize, and the highest line is rising.
For dividend buyers, Walgreens is interesting proper now, providing a dividend yield of 10.9%, which ought to be protected if the enterprise has stabilized.
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Jeremy Bowman has no place in any of the shares talked about. The Motley Idiot has no place in any of the shares talked about. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
