When Walgreens Boots (WBA) posted first-quarter results, the stock gained 27.55% on the day. The worst stock performer on the S&P 500 in 2024 returned to prices not seen since last summer.
In Q1, sales increased by 7.5% Y/Y to $39.5 billion, resulting in an adjusted profit of $0.51 per share. Though the EPS fell from $0.66 last year, Walgreens exceeded analyst estimates. The U.S. retail pharmacy segment is a bright spot. Sales increased by 6.6% to $30.9 billion, while pharmacy sales increased by 10.4%. Inflation lifted retail sales since prices for branded drug products increased. In addition, the company benefited from higher prescription volume.
Walgreens is guiding an EPS of $1.40 to $1.80 for FY 2025. It expects the growth in U.S. healthcare and international markets will offset a drop in U.S. retail pharmacy sales.
The strong rally in WBA stock lifted CVS Health (CVS) stock, too. CVS gained 8.57% to close at $48.01 last week.
Walgreens is unlikely to cut or suspend its generous dividend. This strategic move of the 10.2% dividend yield will hurt short sellers. The short float is 10.91%. In addition, the company may renegotiate its contracts with pharmacy benefit managers. If successful, CEO Tim Wentworth will continue to lead Walgreens through its multi-year turnaround.
