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Walgreens Boots Alliance, Inc. (NASDAQ: WBA), the market leader in retail pharmacy, has been constantly revising its business model to better align with the transformation the healthcare space is witnessing. Currently, the company is working to improve the scale and profitability of its US healthcare business by accelerating investments, with a focus on primary and multi-specialty care services.
Lately, the market hasn’t been too happy with Walgreens stock, which has lost about 30% over the past twelve months. After reversing most of its recent gains, WBA is currently trading below its 52-week moving average. While stocks are likely to remain volatile in the near future, growth initiatives like scaling value-based care delivery will help companies grow market share over the long term and create shareholder value.
Diversification
It’s worth noting that Walgreens’ expansion drive has been successful so far, despite market uncertainty. As the company continues to enter new territories, it will be one of the most diversified healthcare providers a few years from now. Those looking to benefit from long-term opportunities can consider relatively low stock prices as an entry point.
The company will be a one-stop shop for all healthcare needs, from retail pharmacy to primary care and preventive care to telemedicine. Entry into the primary care space, fueled by the acquisition of Summit Health, will be key to getting back on the growth path. If the company succeeds in getting the desired response from the market, it will surely give it an advantage.
competition
However, that strategy won’t make Walgreens immune to competition, and anything wrong with its execution will be an opportunity for competitors to eat into market share. Arch rival CVS Health Corporation (NYSE: CVS ) is aggressively expanding beyond its core retail pharmacy business. But its performance, both financially and in the stock market, has not been very encouraging of late. When it comes to Walgreens, continued weakness in annual sales performance and declining profits will be a concern for stakeholders in the near term.
Despite uncertainties like pandemic-related business disruptions and the economic slowdown, Walgreens has consistently delivered stronger-than-expected quarterly earnings in recent years. That trend continued in the early months of fiscal 2023, even as adjusted earnings fell by more than a third to $1.16 per share in the first quarter. There was a decline in annual sales in both domestic and overseas markets, and total revenue came in at $33.4 billion but exceeded estimates.
From the Walgreens Q1 2023 earnings call:
“We raised our sales guidance, and we have greater visibility of 8% to 10% core growth supporting results, offsetting the 16% to 18% COVID headwind. We are rapidly expanding US healthcare with a defined path to year-over-year profitability this fiscal year. Our strategic actions are being used to create sustainable shareholder value as we envision local health and well-being for all. We are making progress against each of our four strategic priorities. US”
Q2 Report on Touch
When Walgreens reports its second-quarter results on March 28 before the opening bell, the market will be looking for a second year-over-year decline in adjusted earnings to $1.10 per share.. The estimated weakness in the underlying performance indicates a decrease in profits of up to $33.42 billion.
Shares of Walgreens opened Wednesday’s session at $33.55 and have typically traded lower during the day. The company’s current market capitalization is slightly above $28 billion.
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