In the world of commerce, few names command as much respect and recognition as Walgreens Boots Alliance (WBA:NSD). However, today, this retail pharmacy giant finds itself in a precarious situation as its WBA stock forecast continues to plummet. It marked nearly eight years of unrelenting decline.
From its zenith in 2015, WBA shares have shed more than two-thirds of their value. In this article, we dive into the financial challenges faced by Walgreens. Moreover, we look into its recent strategic initiatives, and the cloud of uncertainty that hangs over WBA stock forecast.
Walgreen’s Burden of Immense Debt:
One of the most pressing issues casting a shadow over Walgreens is its colossal debt burden. As of the close of Q2 this year, the company’s total debt had swelled to a staggering $37.4 Billion. To put this in perspective, Walgreens’ total debt eclipses its operating cash flows of $1.3 Billion over the past 12 months by nearly 29-fold. This immense debt load has left the company vulnerable in the face of rising interest rates.
In response to this precarious predicament, Walgreens’ board has embarked on proactive measures to guide the company towards a more promising path.
AmerisourceBergen Share Sale:
Just last month, Walgreens unveiled its decision to divest its shares in AmerisourceBergen Corporation for 1.85 Billion. (WBA:NSD) is anticipating proceeds of approximately $1.6 Billion through prepaid variable share forward transactions.
Moreover, Walgreens stands to gain an additional $250 Million contingent on the WBA stock price at the time, coupled with a concurrent share repurchase by AmerisourceBergen. While this may not constitute a monumental windfall, it represents a significant stride toward financial health.
Leadership Transition: A Ray of Hope
In a pivotal development, Walgreens recently disclosed the resignation of Ms. Brewer from her roles as the company’s Chief Executive Officer and Board member, effective August 31, 2023. Ms. Brewer‘s tenure as CEO coincided with a noticeable decline in the company’s operational performance and WBA stock forecast.
In Fiscal Year 2021, operating profits stood at a robust $5.55 Billion. However, they plummeted to just $3.9 Billion in Fiscal 2022, with operating cash flows dwindling to a mere $1.3 Billion over the past year. While the immediate effects of this leadership change may not be apparent, it holds the potential to be a long-term catalyst for profitability. Walgreens is now in search of a capable CEO to steer its course toward recovery.
WBA Stock Forecast: The Dividend Dilemma
Walgreens’ declining stock price over the past years has led to an escalating yield. This was further amplified by the company’s commitment to consistently increasing its dividend during this challenging period. While Walgreens boasts an impressive 47-year streak of annual dividend hikes, the sustainability of this streak is now under scrutiny.
To gain insight into the company’s current financial landscape, let us scrutinize its most recent fiscal Q3 results. Revenues for the quarter surged by 8.6% to $35.4 Billion. This was driven by sales growth in the U.S. Retail Pharmacy and International segments and a substantial contribution from the U.S. Healthcare segment.
WBA Financial Losses: A Question of Sustainability
However, challenges such as weaker demand for COVID-related services, a value-conscious consumer base, and a softer respiratory season resulted in margin pressures. Consequently, Walgreens posted an operating loss of $0.5 Billion for the quarter. This marked a significant increase from the $0.3 Billion loss in the same period the previous year.
After adjusting for non-cash items, operating income stood at $1.0 Billion, with adjusted net income reaching $860 Million, marking a 3.4% increase over the prior year.
Nevertheless, the dividend remains thinly covered. Operating cash flows over the past nine months amounted to $1.22 Billion. They fell short of the dividends paid during the same period, totaling $1.24 Billion. The decision by the company to forgo its customary dividend increase in July serves as an indicator of concerns regarding affordability.
WBA Stock Forecast: Analyst Insights
As per the WBA stock forecast, the average stock price target of (WBA:NSD) is USD 35.21. This implies a potential upside of 54.91%. from the current price of USD 22.73. Walgreens has a high market CAP of USD 20.23 Billion.
The analysts at Truist Financial reiterated their Hold rating on the stock with a price target of USD 30. WBA stock is low in volatility which makes it a stable stock. Walgreens currently maintains a “Hold” consensus rating as analysts view it as slightly bullish.
Charting the Course Amid Uncertainty:
Walgreens Boots Alliance stands at a pivotal juncture, with its time-honored dividend facing uncertainty in the wake of persistent profitability challenges. The recent moves, such as the sale of AmerisourceBergen shares and the leadership transition, signify positive strides.
However, the looming specter of the company’s massive debt remains a palpable threat. Whether Walgreens can engineer a turnaround or not, investors must remain vigilant.
Final Takeaway:
In conclusion, as Walgreens grapples with its financial tribulations, it serves as a reminder that even corporate titans are susceptible to uncertainty and adversity. The fate of its dividend, once an emblem of stability, now hangs in the balance. It is contingent upon the company’s strategic maneuvers and the ever-evolving market conditions. These factors will ultimately shape its destiny.
