Walgreens is gearing up to report its fiscal Q3 2024 results, with expectations of revenue and earnings surpassing street estimates. Despite a predicted 25% decline in year-over-year earnings, the company is anticipated to benefit from its cost reduction efforts. The stock is currently undervalued at around $16, and analysts believe it will trade higher following the Q3 announcement. Walgreens’ stock performance has seen a sharp decline of 60% in recent years, underperforming the S&P 500. However, the Trefis High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the benchmark index.
In the midst of an uncertain macroeconomic environment, with high oil prices and elevated interest rates, there is speculation as to whether Walgreens may face challenges similar to those experienced in 2022 and 2023. Despite these uncertainties, experts believe that WBA stock is undervalued and could potentially reach around $24 per share, nearly 50% above its current market price. The company is expected to see higher levels based on a 7x forward expected adjusted earnings estimate of $3.28. Walgreens’ adjusted earnings forecast for 2024 falls within the range of $3.20 and $3.35.
In the previous quarter, Walgreens saw a 6.3% year-over-year increase in revenue to $37.1 billion, driven mainly by a 33% rise in U.S. Healthcare revenues. The U.S. Retail pharmacy segment benefited from higher branded drug price inflation. Despite a slight contraction in adjusted operating margin, the company’s bottom line expanded slightly to $1.20 on an adjusted basis. Looking ahead to the latest quarter, analysts expect revenues to be around $36 billion, with continued benefits from drug price inflation and pharmacy service growth. Walgreens has focused on cost-cutting initiatives to achieve $1 billion in savings this year.
While expectations are for a 25% year-over-year decline in adjusted earnings to $0.75 per share in Q3, overall, Walgreens is anticipated to post a positive performance for the quarter. The company’s stable sales growth and continued cost-cutting efforts are seen as favorable factors for its stock. Despite the challenges faced by Walgreens in recent years, analysts remain optimistic about the company’s future performance. It is noted that it is helpful to compare Walgreens with its industry peers to gain a better understanding of its performance and potential within the market.
