On Tuesday, RBC Capital Markets adjusted its outlook on Walgreens Boots Alliance (NASDAQ:WBA) shares, reducing the price target from $22.00 to $13.00 while retaining a Sector Perform rating on the stock. The revision follows a comprehensive review and commentary on the company's third fiscal quarter of 2024 results.
The firm's assessment pointed to ongoing challenges in the retail and pharmacy sectors, which are expected to persist into the next fiscal year. In light of these industry headwinds, RBC Capital has revised its forecast for Walgreens' fiscal year 2025 adjusted earnings per share (EPS) downwards.
The decision to maintain the Sector Perform rating indicates that the firm's stance on Walgreens' stock remains neutral. The reduced price target of $13.00 reflects the updated earnings estimates and the anticipation of continued pressure on the company's financial performance.
The updated model and commentary from RBC Capital offer a detailed look at Walgreens' position amid a tough operating environment. The new price target of $13.00 is a notable adjustment from the previous $22.00, signaling revised expectations for the company's valuation.
Walgreens Boots Alliance has not yet responded to the new price target and rating confirmation. The market will continue to monitor the company's performance closely, especially in the context of the retail and pharmacy sector challenges highlighted by RBC Capital Markets.
In other recent news, Walgreens Boots Alliance has faced a challenging fiscal year 2024, adjusting its full-year outlook to an earnings per share (EPS) of $2.80 to $2.95. The company's third-quarter earnings fell short of expectations, with an EPS of $0.63, primarily due to difficulties in the U.S. retail pharmacy sector. Analyst firms, TD Cowen, Truist Securities, and Mizuho Securities, have all adjusted their outlooks on Walgreens, reducing their price targets but maintaining their ratings.
Walgreens is implementing strategic measures to improve its financial performance and market position, including accelerated store closures, reconfiguring retail experiences, and simplifying U.S. healthcare operations. These initiatives are part of a broader turnaround strategy, with further financial details expected to be shared by the company in October.
Moreover, Walgreens has announced a strategic review update, including a footprint optimization program targeting underperforming locations, which could affect approximately 25% of the company's store network.
The company is also planning to refine its business model and invest in sectors like Boots UK and VillageMD. Despite the challenging U.S. retail environment, Walgreens is actively adjusting its pricing strategy and enhancing its omnichannel experience.
InvestingPro Insights
In the wake of RBC Capital Markets' revised outlook for Walgreens Boots Alliance, current metrics from InvestingPro provide additional context to the company's financial health. With a market capitalization of $10.0 billion and a notably high dividend yield of 8.64% as of mid-2024, Walgreens appears to maintain a strong position in terms of shareholder returns, despite recent price volatility.
The company's revenue growth over the last twelve months as of Q3 2024 stands at 6.92%, coupled with an EBITDA growth of 20.98%, indicating some operational resilience amidst the challenges. Moreover, the InvestingPro Fair Value estimate of $15.26 suggests potential undervaluation compared to the current price, which may interest value investors.
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