On Tuesday, TD Cowen made adjustments to its outlook on Walgreens Boots Alliance (NASDAQ:WBA), reducing the price target to $14 from the previous $16 while maintaining a Buy rating on the stock. The adjustment follows a review of the company's fourth fiscal quarter of 2024 and revised projections for the fiscal year 2025.
The firm's analyst provided insights into the revised estimates, noting that the adjusted earnings per share (EPS) for the fiscal year 2025 is now anticipated to be $1.54, a decrease from the earlier forecast of $1.71. The analysis included a detailed assessment of the impact of store closures on the company's financial performance.
Despite the downward revision for the upcoming fiscal year, the analyst expects that by the fiscal year 2026, the adjusted EPS will experience a year-over-year decline at a decelerated pace. This trend is projected to reverse, with a return to growth expected in the fiscal year 2027.
The forecast for the fiscal year 2025 free cash flow (FCF) has been improved to a negative $533 million, which is more favorable compared to the prior estimate of negative $1.4 billion. The improvement in free cash flow projections is a significant financial indicator for the company.
The analyst also mentioned that depending on the rate of recapture, which is assumed to be 60%, the fiscal year 2026 could exhibit nearly flat EPS growth. This would set the stage for a potential acceleration in earnings growth in the fiscal year 2027, indicating a more positive long-term outlook for Walgreens Boots Alliance.
In other recent news, Walgreens Boots Alliance reported its fourth quarter fiscal year 2024 adjusted earnings per share (EPS) at $0.39, surpassing consensus estimates by 8.3%. The company also provided its initial fiscal year 2025 adjusted EPS guidance in the range of $1.40 to $1.80. Recent developments include plans to close approximately 1,200 underperforming stores over the next three years.
Analyst firms such as Mizuho, Leerink, Deutsche Bank, and TD Cowen have maintained their respective ratings on Walgreens, with price targets ranging from $10 to $16. BofA Securities, on the other hand, maintained its Underperform rating with a price target of $7.50, citing persistent challenges despite the company's cost-cutting measures.
InvestingPro Insights
Recent data from InvestingPro offers additional context to TD Cowen's analysis of Walgreens Boots Alliance (NASDAQ:WBA). The company's market capitalization stands at $9.04 billion, reflecting its current position in the market. Despite the challenges highlighted in the article, WBA's revenue growth of 6.17% over the last twelve months as of Q4 2024 suggests some resilience in its business model.
However, the company's financial health presents a mixed picture. The negative P/E ratio of -2.59 (adjusted for the last twelve months as of Q4 2024) aligns with the analyst's concerns about earnings. This is further underscored by the basic EPS from continuing operations at -$10.01 for the same period.
InvestingPro Tips point out that WBA's dividend yield is notably high at 9.57%, which could be attractive to income-focused investors. However, it's important to note that the dividend growth rate has declined by 47.92% over the last twelve months, which may raise questions about the sustainability of such high yields.
These insights complement the article's focus on future earnings projections and free cash flow estimates. For readers interested in a deeper dive, InvestingPro offers 16 additional tips for Walgreens Boots Alliance, providing a more comprehensive view of the company's financial situation and market position.
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