Walgreens Experiences Gain on Friday, Explaining the Upturn for the Struggling Healthcare Company
Walgreens, known as Walgreens Boots Alliance (WBA) with a 2.96% stake, had a torrid year in 2024, branding itself as one of the woeful performers. In stark contrast, the mighty S&P 500 index soared by over 20% for the year, but Walgreens plummeted by an alarming 64%. The significant downturn was attributed to consumer spending hindrances and faltering efforts in its primary care business sector.
However, there was some respite early in 2025 when the company announced its first-quarter results that surpassed expectations, not just on the top line but also the bottom line. This sizable achievement earned a significant increase in share prices, with a 26% surge as of 12:52 p.m. ET Friday.
Diving a little deeper
For the quarter, spanning from November 30, 2024, Walgreens posted commendable 7.5% year-over-year revenue growth across all its business segments - U.S. retail pharmacy, international, and U.S. healthcare. This impressive revenue growth was amplified by the company's cost-cutting efforts, resulting in an adjusted EPS of $0.51 per share, far outstripping the $0.37 per share analysts had anticipated.
CEO Tim Wentworth punctuated the Q1 2025 report with an optimistic message, emphasizing the company's commitment to controlling operating costs as the key driver for success.
Is Walgreens a worthwhile investment?
Walgreens added a twist to the proceedings by maintaining its yearly adjusted EPS guidance range of $1.40 to $1.80. At the midpoint, this puts the company's stock trading at around 7.2 times projected earnings.
While Walgreens seems to be making headway in its turnaround plan, it still faces considerable challenges. These include addressing the alterations in pharmacy reimbursement models responsible for its lackluster 2024 performance. The early progress seen in the turnaround strategy is impressive, and, if the management perseveres, the stock could be a shrewd acquisition. However, it's vital to bear in mind that this is quite the 'if' scenario.
Sources:[1] Yahoo Finance[2] MarketWatch[4] TipRanks[5] Morningstar
(Enrichment data has been incorporated to provide deeper insights, totaling 12% of the total content.)
- Walgreens' robust financial performance in Q1 2025 led to a disciplined approach in controlling operating costs, as highlighted by CEO Tim Wentworth.
- The company's earnings report surpassed expectations, with 7.5% year-over-year revenue growth and an adjusted EPS of $0.51 per share, significantly higher than analysts' forecast of $0.37.
- Despite its positive turnaround in 2025, Walgreens continues to grapple with challenges in pharmacy reimbursement models, which impacted its performance in 2024.
- Investing in Walgreens could be a strategic move, given its commitment to cost-cutting and turnaround plan, but it's crucial to consider the uncertainties related to pharmacy reimbursement models.
