On Thursday, Walgreens Boots Alliance (NASDAQ:WBA) received a reiterated Sector Perform rating with a steady price target of $22.00 from RBC (TSX:RY) Capital. The company reported its fiscal third-quarter 2024 earnings, which fell short of expectations due to continued consumer weakness and pharmacy margin pressures. This was somewhat balanced by strong international performance and a positive EBITDA contribution from U.S. Healthcare.
Walgreens management has revised its adjusted earnings per share (EPS) guidance downward by $0.40 at the midpoint, a 12% reduction, primarily due to poorer than anticipated consumer performance and ongoing pharmacy challenges. In an effort to address these issues, the company has provided updates on its strategic review, which includes optimizing store operations, enhancing the U.S. Retail Pharmacy customer experience, integrating pharmacy and healthcare services, and streamlining the U.S. Healthcare portfolio. Further details on the implementation of these strategies are expected to be shared in today's earnings call.
The company posted an adjusted EPS of $0.63, which was below both the $0.70 estimate by RBC Capital and the $0.68 consensus. This shortfall was attributed to weaker U.S. Retail trends and sustained pressure on pharmacy margins. Compared to the same quarter last year, the quarter's results received significantly less benefit from sale-leaseback transactions, which explained 65% of the year-over-year decline in adjusted EPS.
Walgreens saw a 2.6% year-over-year increase in consolidated revenue, reaching $36.4 billion, which was slightly above the $36.2 billion estimate and the $36.0 billion consensus. The quarter's cash flow from operations was $605 million with free cash flow (FCF) of $334 million, marking an improvement of $778 million from the third quarter of fiscal year 2023, largely due to working capital optimizations and reduced capital expenditures.
Following the earnings announcement, management has adjusted the full-year 2024 EPS guidance to a range of $2.80 to $2.95, down from the previous forecast of $3.20 to $3.50.
In other recent news, law firms involved in the opioid crisis litigation have been awarded a $2.13 billion legal fee pool, with Motley Rice receiving the largest portion of $396 million. The implicated parties in the settlements include Johnson & Johnson, AbbVie (NYSE:ABBV), Teva Pharmaceutical Industries (NYSE:TEVA), and CVS, among others. The total financial impact of opioid settlements now surpasses $50 billion.
Meanwhile, AbbVie's arthritis medication, Humira, retains over 80% of its patient base despite competition from nine biosimilar drugs. In other developments, CVS Health Corp (NYSE:CVS) is seeking a private equity partner to support the expansion of Oak Street Health, a primary care provider it acquired last year. The company plans to nearly double the size of Oak Street Health to 300 clinics by 2026.
In financial news, CVS Health's first-quarter earnings for 2024 fell short of market expectations, leading to a downward revision in its guidance and a cut in its stock price target by an Argus analyst. The company now projects its adjusted operating income for 2024 to be at least $14.75 billion. However, CVS Health remains committed to margin improvement. On a different note, an analyst from TD (TSX:TD) Cowen downgraded CVS Health Corp's stock status from "Buy" to "Hold", citing potential risks and uncertainties that emerged in the first quarter. The analyst also expressed caution regarding CVS's longer-term prospects.
InvestingPro Insights
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