Shares of Walgreens Boots Alliance (NASDAQ: WBA) fell sharply last year as a combination of weakening demand for vaccines, consumer durables spending headwinds and misguided acquisitions led to a series of dismal earnings reports from the company.
As a result, Walgreens was forced to cut its dividend, take billions of dollars in impairment charges, and lose its place in the stock market. Dow Jones Industrial Average (DJINDICES: ^DJI). The stock fell 64% over the course of 2024, according to data from S&P Global Market Intelligence. As you can see from the chart, the stock fell steadily for most of the year while the outlook continued to decline.
Walgreens fell steadily through the first three quarters of the year as the company missed estimates and lowered expectations, and Wall Street’s view of the stock deteriorated. In the fourth quarter the share seemed to stabilize, but there were no signs of recovery yet.
The lows started early for Walgreens, as it said it cut its dividend in early January when it reported first-quarter earnings. The company cut its dividend 48% to $0.25 per quarter, which it said was part of a focus on right-valuing costs and increasing cash flow. The company also maintained adjusted earnings per share at $3.20-$3.50 at the time.
In its second-quarter report, released in late March, Walgreens dropped another bombshell on investors, taking a $5.8 billion write-down on goodwill on VillageMD. It has taken over the primary care and urgent care sectors as a way to diversify and vertically integrate, but it has become clear that it has vastly overpaid the company. Walgreens paid $5.2 billion in 2021 to increase its stake in VillageMD from 30% to 63%, although its growth strategy in the company fell short. It also cut its adjusted earnings forecast for the quarter to $3.20-$3.35.
Walgreens’ worst day of the year was June 27, when shares fell 22% after another disappointing earnings report. This time, it lowered its full-year earnings per share guidance to $2.80-$2.95 due to challenging trends in the pharmaceutical sector and a weak consumer environment.
Nearly everything that could go wrong for Walgreens last year did, but the company showed signs of recovery in its first-quarter earnings report earlier this month. Although management expects adjusted earnings per share of only $1.40-$1.80 this year, the company appears to be stabilizing and revenue is growing.
For dividend investors, Walgreens is attractive right now, with a dividend yield of 10.9%, which should be safe once the company has stabilized.
