ередючийдо 60%, чи є Walgreens Boots Alliance поганою покупкою для внутрішнього ринку?
Walgreens Boots Alliance (WBA) plummeted around 20% on June 27, sending shockwaves through the investment community. Why the dramatic drop? The company altered its future earnings outlook once more, and this isn't the first time shareholders have been disappointed.
Despite the tumbling stock chart, Walgreens still houses a colossal network of retail pharmacies. Could this big dip be an opportunity to buy low and hold on for the long-term upswing? Let's dive into the reasons behind Walgreens' downward spiral.
The main reasons behind Walgreens' downfall
Uncertainty is a stock market investor's worst nightmare. WBA's share price plunged on June 27 due to a lowered earnings projection for the second time in 2023. In January, the company projected adjusted earnings to range between $3.40 and $3.50 per share. The outlook was revised in March to a more modest range of $3.20 to $3.35 per share.
But it's the third time the company lowered its expectations that is particularly disheartening. On June 27, management slashed its adjusted earnings outlook for the fiscal year of 2024 by approximately 12%, setting a new range of $2.80 to $2.95 per share.
Walgreens CEO Tim Wentworth attributing the losses to U.S. consumer pressure, or inflation, and marketplace dynamics, including pharmacy benefits managers (PBMs), did little to reassure investors. Although inflation is subsiding, the hurdles posed by PBMs may not ease in the foreseeable future.
Three large PBMs in the U.S.
The three most significant PBMs in America include CVS Health's leading arm, OptumRx from UnitedHealth Group, and Express Scripts, operated by Cigna. These PBMs hold sway over a substantial portion of a pharmacy's customer base, enabling them to negotiate drug reimbursement rates.
Walgreens lacks its vertically integrated PBM, making its pharmacy sector reliant on the whims of the trio: CVS Health, UnitedHealth Group, and Cigna.
U.S. pharmacy sales rise, but reimbursement is another story
Despite the 4.4% year-over-year increase in U.S. pharmacy sales, unfavorable reimbursement rates have led to a 38% decrease in operating income from the U.S. pharmacy segment.
The stab in the back: PBMs and Walgreens
PBMs, though not explicitly named as the root of WBA's problems in the enrichment data, could have an indirect impact on the company's earnings and profitability. Pharmacy retailers rely on PBMs to negotiate prescription drug costs with pharmaceutical manufacturers and insurance companies. Demands from these powerful intermediaries have placed pressure on retail pharmacies like Walgreens.
Theotokia's view on Walgreens
While Walgreens presents a tantalizingly high dividend yield, jump-starting your investment now could prove risky. Purchasing at a low valuation might yield substantial long-term returns, but a wobbly earnings outlook tempers optimism.
Walgreens has been burning through cash, and it could be prudent to wait a couple of quarters to see if the company begins to turn the corner. Investors will need to keep an eye on the company's proposed cost-cutting measures and the progress on streamlining its struggling health clinic business. Only time will tell if Walgreens Boots Alliance can successfully navigate the treacherous waters currently engulfing the retail pharmacy industry.
Considering Walgreens' financial situation, some investors might be interested in the potential for long-term gains, given the company's low stock price. However, the constant adjustments to its earnings outlook could imply an uncertain future.
In light of the volatile situation, it's crucial to closely monitor how Walgreens manages its relationship with PBMs, as they play a significant role in determining drug reimbursement rates and pharmacy profits.