Walgreens Exceeds Expectations: A Look at Its Strong Q4 Performance

Walgreens (NASDAQ:WBA) has just released its Q4’24 financial results, and the figures tell a compelling story. The company reported revenue of $37.5 billion and adjusted earnings of $0.39 per share, surpassing our expectations of $34.9 billion and $0.38 respectively. The positive earnings news, along with a promising outlook for fiscal 2025, resulted in a substantial 20% jump in WBA stock over just two days. In this article, we’ll delve into Walgreens’ performance, highlight key takeaways, and discuss its valuation moving forward.

Q4 Performance Highlights

Walgreens’ revenue increased by 6% to $37.5 billion in Q4’24, driven primarily by its U.S. Retail Pharmacy segment, which rose 6.5% year-over-year to $29.5 billion. International sales also grew by 3.2% to $6.0 billion, and the U.S. Healthcare sector saw a 7.1% increase to $2.1 billion. Notably, the growth in Pharmacy revenue was largely thanks to drug price inflation, while retail sales experienced a decline of 3.5%. The German wholesale division remained a strong contributor to the company’s international success.

The adjusted operating margin fell to 0.9% in Q4’24, down from 1.6% the previous year. Adjusted earnings decreased to $0.39 per share, compared to $0.67 in Q4’23. This decline was primarily due to reimbursement pressures.

Overall, Walgreens performed better than expected in Q4. For fiscal 2025, the company has projected sales between $147 billion and $151 billion and adjusted earnings ranging from $1.40 to $1.80 per share, aligning closely with consensus estimates.

Implications for WBA Stock

The optimistic outlook for 2025 is likely to boost investor confidence. Management plans to close 1,200 stores over the next three years to enhance profitability, with 500 closures slated for 2025, which should help improve overall margins. Our current valuation for Walgreens stands at $14 per share, based on an 8x forward expected adjusted earnings of $1.71, slightly below the average P/E ratio of 9x over the past four years.

Despite the recent surge, WBA stock remains down 56% year-to-date. Historically, the stock has shown volatility, with larger fluctuations compared to the S&P 500. In contrast, the Trefis High Quality (HQ) Portfolio—a collection of 30 stocks—has been significantly less volatile and has outperformed the S&P 500 annually during the same period. This indicates that HQ Portfolio stocks provide better returns with reduced risk, making for a steadier investment experience.

While the potential for WBA stock appears promising, it is important to consider how Walgreens’ peers measure up across critical performance metrics. For further insights on various companies within different industries, check out our Peer Comparisons.

[1] Returns as of 10/17/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.