To The Moon

$Walgreens Boots Alliance(WBA)$ is scheduled to release its fiscal Q3 2025 earnings before market open on Thursday, 26 June 2025. Due to a definitive agreement to be acquired by entities affiliated with Sycamore Partners, WBA will not be hosting a conference call for this quarter.

Expected Earnings Per Share (EPS): Analysts project an average EPS of $0.34. This represents a significant decline of approximately 46% compared to the $0.63 reported in the same period last year (Q3 2024).

Expected Revenue: The consensus revenue forecast is around $36.66 billion to $36.72 billion, indicating a modest year-over-year increase of approximately 0.9%.

Walgreens Boots Alliance (WBA) Last Neutral Earnings Call Saw Share Price Gained 5.98%

Walgreens (WBA) had a neutral earnings call on 08 April 2025 which saw its share price gained 5.98% since.

The earnings call highlighted strong sales growth across all segments, improved free cash flow, and positive performance in the pharmacy and healthcare segments. However, it also noted challenges with declining retail sales in the U.S. and a significant decline in adjusted EPS. Despite these challenges, the company remains focused on executing its turnaround strategy.

Walgreens Boots Alliance (WBA) Guidance

During the Walgreens Boots Alliance earnings call for Q1 2025, the management provided detailed guidance on several key metrics. Sales increased by 6.9% on a constant currency basis, with growth across all segments. The adjusted earnings per share (EPS) was reported at $0.51, reflecting a 23% decline year-over-year, primarily due to prior year sale-leaseback gains and lower Cencora equity income.

Despite these challenges, the U.S. Retail Pharmacy segment saw a notable comparable sales growth of 8.5%, driven by pharmacy performance, although retail sales declined. In the U.S. Healthcare segment, sales rose by 12%, with VillageMD and Shields showing strong performance. The company achieved significant progress in its Footprint Optimization Program, closing about 70 stores in the quarter and planning for nearly 450 more by the end of 2025.

For the fiscal year, Walgreens Boots Alliance reaffirmed its adjusted EPS guidance of $1.40 to $1.80, while also expecting retail comp sales to decline approximately 4% to 5%. The company emphasized its focus on stabilizing and turning around its business by improving drug procurement, optimizing store operations, and advancing its pharmacy services, with a strong emphasis on cost management and cash flow improvement.

Key Expectations for Q3 2025 (Fiscal Quarter ending May 2025)

Breakdown of Revenue Segments

Sales increased 6.9% on a constant currency basis with growth across all segments.

U.S. Retail Pharmacy Revenue: Expected to be around $28.76 billion, a projected increase of 0.9% year-over-year. U.S. Pharmacy Services performed better than expectations with higher margin for COVID-19 vaccines.

U.S. Healthcare Revenue: Forecasted to reach $2.17 billion, suggesting a 2.3% increase year-over-year. U.S. Healthcare sales of $2.2 billion increased 12%, with strong performance from VillageMD and Shields.

International Revenue: Anticipated to be $5.74 billion, with a projected increase of 0.2% year-over-year. Total sales in the International segment grew 6.5% with Germany wholesale increasing 11.3% and Boots UK up 4.5%.

Operating Income Expectations

Adjusted Operating Income (Loss) - U.S. Retail Pharmacy: Analysts expect this to be approximately $113.67 million, a stark contrast to the $501 million reported in the year-ago period. This indicates a significant anticipated decline in profitability for their core U.S. pharmacy business.

Adjusted Operating Income (Loss) - International: Expected to be around $196.39 million, an increase compared to $175 million in the prior year, suggesting better performance in their international segment.

Context and Outlook

Declining EPS: The projected significant drop in EPS points to continued challenges in profitability for Walgreens, particularly within its U.S. Retail Pharmacy segment. This could be due to various factors like higher costs, lower retail sales (outside of pharmacy), and lapping prior year gains.

Adjusted EPS declined 23% year-over-year on a constant currency basis due to prior year sale-leaseback gains and lower Cencora equity income.

Modest Revenue Growth: While revenue is expected to see a slight increase, it's not a substantial growth, suggesting that the company is struggling to significantly expand its top line.

Free cash flow improved due to decreased capital expenditures and higher adjusted operating income. Comparable retail sales in the U.S. declined 4.6% in the quarter due to a softer cough, cold, and flu season and challenging consumer discretionary spending.

Strategic Shift: Walgreens has been focusing on its U.S. Healthcare segment, aiming to transform into a more integrated healthcare provider. The projected increase in U.S. Healthcare revenue aligns with this strategy.

Persistent deterioration in consumer discretionary spending and promotional environment continue to impact the retail business.

Analyst Sentiment: The consensus EPS estimate has remained unchanged over the last 30 days, suggesting that analysts have a relatively stable view of the company's performance for this quarter. WBA currently holds a Zacks Rank #2 (Buy), indicating that it is expected to outperform the overall market in the near future, despite the projected decline in EPS. However, it's worth noting that some analysts have recently downgraded the stock.

Acquisition Agreement: The company's announcement on March 6, 2025, that it entered a definitive agreement to be acquired by entities affiliated with Sycamore Partners is a significant development and will influence how investors perceive these results. The lack of a conference call this quarter is a direct consequence of this pending transaction.

Walgreens Boots Alliance (WBA) Price Target

Based on 12 analysts from Tiger Brokers offering 12 month price targets for Walgreens Boots Alliance in the last 3 months. The average price target is $11.57 with a high forecast of $15.00 and a low forecast of $8.50. The average price target represents a 1.91% change from the last price of $11.35.

Technical Analysis - Exponential Moving Average (EMA)

We are see that WBA is consolidating though we are seeing WBA in range-bound trading with positive momentum. But there is not much positive factors that could boost the share price, but the persistent deterioration in consumer discretionary spending and promotional environment might continue to impact the retail business.

That could drive WBA share trading into a volatilty trading after its earnings.

Summary

Investors will be closely watching whether WBA meets or misses these expectations, particularly regarding the U.S. Retail Pharmacy operating income, to gauge the extent of the challenges it faces and the progress of its strategic initiatives prior to the acquisition.

Appreciate if you could share your thoughts in the comment section whether you think WBA could improve its U.S. Retail Pharmacy operating income.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.