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Walgreens Earnings: Should You Go Anywhere Near This Falling Knife?

Published 27/03/2024, 10:08
WBA
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  • Walgreens' declining profits are fueling bearish sentiment.
  • Can the new CEO orchestrate a turnaround?
  • Meanwhile, the stock's downward trajectory persists.
  • In 2024, invest like the big funds from the comfort of your home with our AI-powered ProPicks stock selection tool. Learn more here>>
  • Walgreens Boots Alliance (NASDAQ:WBA), a major U.S. pharmacy and drugstore chain, has seen its stock steadily decline over the long term. By the end of last year, it hit its lowest level since 1998.

    Recent quarters have only exacerbated this situation, with net income showing negative growth and declining figures. As a result, the company announced a reduction in its quarterly dividend from $0.48 to $0.25 per share.

    There's a glimmer of hope, though, with the appointment of new CEO Tim Wentworth, a seasoned leader in the healthcare industry.

    Investors are eagerly awaiting tomorrow's quarterly results, which, if they align with forecasts, will likely confirm the ongoing downward trend in earnings per share.

    WBA Net Income to Company

    Source: InvestingPro

    Why Is WBA Stock Falling?

    Walgreens requires more cash immediately to support its growth in the healthcare sector. To raise funds, the company has reduced its dividend and sold shares in Cencora for nearly $1 billion.

    It also intends to sell off Shields Health Solutions and Boots UK, aiming to raise around $12 billion. However, the company's financial condition appears weak due to its high debt burden, currently at a net debt/total capital ratio of 56%.
    Peer Benchmarks

    Source: InvestingPro

    What to Expect From Q2 Earnings?

    Tomorrow, Walgreens will release its quarterly results for the 2nd quarter of fiscal 2024. The outcome hinges significantly on the strategy implemented by the new CEO, Tim Wentworth.

    It appears that the main focus will be on bolstering the company's cash reserves. However, the key to reversing the stock's downward trend will be a return to reporting net profits.

    Analysts expect a decrease in earnings per share growth from $1.16 to $0.85 per share compared to the previous quarter.

    Upcoming Earnings

    Source: InvestingPro

    The number of downward revisions stands at 10, while only one upward revision has been observed. The technical analysis suggests a potential attempt to challenge last year's lows of around $20 per share.

    If the results disappoint, it could lead to further declines. Conversely, if the results exceed expectations, there's a possibility of forming a double-bottom pattern.

    Walgreens Stock: Technical View

    The Walgreens stock price has been forming a wedge pattern for over two months. This pattern suggests a continuation of the downtrend. It's likely reaching its final stages, especially with the upcoming quarterly results and a test of long-term lows around $20 per share.

    WBA 5-Hour Chart

    The best scenario for movement would be defending the minimum while breaking out from the wedge formation's top. In this case, buyers would target the local high near $24 per share.

    However, solid quarterly revenue and earnings per share data are needed for this upward movement. Key developments are expected tomorrow.

    ***

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    Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remains with the investor.

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