WBA Stock: Is The Dow Giant A Buy Or Sell After Earnings?

Walgreens Boots Alliance (WBA) is the largest global pharmacy and wellness retailer by number of stores, with more than 13,000 locations in 11 countries. WBA stock just made a big move on quarterly earnings. Is Walgreens stock a buy?


Walgreens stock has a track record of failing to keep pace with the S&P 500 and is well below all-time highs. If you’re thinking about buying this Dow Jones component, it’s key to analyze the fundamental and technical picture first.

WBA Stock Earnings

Walgreens’¬†Q4 earnings on Oct. 14 topped analyst estimates. The drugstore chain reported earnings of $1.17 per share, up 29%. Revenue jumped 13% to $34.3 billion. Wall Street expected earnings of $1.o2 on $33.3 billion in revenue. WBA stock initially was weak after the report, but shook that off and reversed powerfully higher.

Strong sales were boosted by growing vaccine mandates across the country. Walgreens reported it had administered more than double the amount of Covid vaccines than expected over the last quarter. Another bright spot? Sales of over-the-counter drugs also saw a bump over the last three months.

“Comparable U.S. pharmacy and retail sales both saw robust growth and recovery continued in our UK business as COVID-19 restrictions eased in the quarter,” CEO Rosalind Brewer said in an Oct. 14 earnings statement. “The role of the pharmacist and local pharmacy is now more vital than ever.”

Walgreens also announced it has hit cost savings targets ahead of schedule. The company shaved $2 billion in expenditures thanks to a “transformational cost management program” implemented in 2018. Executives said they would raise cost savings targets to $3.3 billion by 2024.

Raises Investment In Health Company

Walgreens announced on Sept. 21 it’s upping its investment in Shields Health Solutions. The drugstore company will pay $970 million to raise its stake in the specialty pharmacy company. This investment also will give Walgreens a controlling stake in Shields. WBA stock didn’t get a boost from the news.

Walgreens’ ownership play in Shields comes just three months after the retailer announced plans with partner VillageMD to open 29 primary care facilities in 2021. The company also announced a 5-year deal with telehealth provider Northwell Health to cover patients in New York state.

Covid Booster News Moves Drug Store Stocks

Walgreens is increasing its health care investments amid the covid booster push and is ramping up vaccine efforts for an expected rise in demand. “[We] feel confident we have the pharmacy expertise, infrastructure and local community presence to accelerate access to these vaccinations,” Walgreens said in an Aug. 18 news release.

Drugstore stocks dipped on Aug. 19 as the Biden administration paved the way for Covid vaccine booster shots later this fall. WBA stock fell roughly 3%. Rivals CVS (CVS) and Rite Aid (RAD) also edged lower.

Those in the U.S. who received the two-dose regimens can get a third shot of either Pfizer/BioNTech’s or Moderna, according to a joint statement from the Centers for Disease Control and Prevention, the Food and Drug Administration and the National Institutes of Health. The shots will begin Sept. 20 for the earliest recipients and are recommended eight months following the second dose.

Walgreens Stock Falls As Amazon Enters Market

Walgreens stock fell 4% on May 26 after Amazon (AMZN) announced it’s exploring plans to open U.S. pharmacy locations. CVS Health (CVS) dipped 2% on the news while Rite Aid (RAD) sank 3%.

Though Amazon’s plans for physical drugstore locations are in the exploratory phase, the e-commerce giant has already shown interest in expanding to the health care market. Amazon entered the pharmacy retail market with at-home drug deliveries with its 2018 acquisition of PillPack. It officially launched Amazon Pharmacy in November 2020.

A possible expansion of Amazon’s efforts into physical drugstore locations comes at a time when WBA stock and other drug retailers have been squeezed by changing consumer habits. Covid lockdowns marked a shift from in-store to online purchases, leaving retailers scrambling for ways to increase foot traffic. Walgreens is trying to adapt by expanding home delivery and curbside pickup options.

Walgreens Stock Fundamental Analysis

To determine whether WBA stock is a buy now, fundamental and technical analysis are key.

The IBD Stock Checkup tool shows that WBA stock has an IBD Composite Rating of 54 out of a best-possible 99. The rating means Walgreens stock ranks relatively poorly vs. other stocks in the market. That’s in terms of the most important fundamental and technical stock-picking criteria.

The Composite Rating looks at earnings and sales growth, profit margins, return on equity and relative stock price performance, among other metrics.

WBA stock also has a poor EPS Rating of 70 out of 99. The EPS rating compares a stock’s quarterly and annual earnings-per-share growth with that of all other stocks.

These rankings place the drugstore operator in the No. 2 slot against its retail peers in IBD’s small Retail-Drug Stores industry group. But the group is currently ranked a weak No. 167 out of the 197 industry groups that IBD tracks. Investors ideally should focus on top stocks in the top quartile of IBD’s groups.

WBA Stock Technical Analysis

WBA stock reversed powerfully higher on Oct. 14 after earnings. That gain put the stock back above its 50-day and 200-day lines in massive volume. The move also coincides with WBA stock clearing a trendline from its early and late September highs.

Aside from the post-earnings early entry, WBA stock is working on a consolidation with a 57.15 buy point, 20 cents above its early-April high.

Previously, WBA stock sank after its earnings report in July. This decline sent shares down to their 40-week line for the first time since early January.

Aside from a few brief periods, Walgreens’ relative strength line has been in a downtrend since the stock peaked back in 2015. While it had been moving higher earlier in the year, it’s been on a steady decline since April and remains near its lowest levels in decades.

The RS line compares a stock’s price action with that of the S&P 500, meaning WBA stock has underperformed the market for years. From 1975 to its dot-com era highs in 2000, WBA stock notched significant returns. But from 2000 to 2015, Walgreens stock essentially only kept pace with the market.

Fast-forward to the coronavirus crash, and you’ll see the RS line for WBA stock had a short-term pop in March 2020 as the market tried to find a bottom.

Outperformance picked up a bit in early 2021 as value plays shifted into focus along with the vaccine rollout. Still, Walgreens stock is in a prolonged downtrend. The stock has trended lower since peaking in 2015.

WBA Stock: Is It A Buy?

Bottom line: WBA stock is technically a buy right now. Investors could key off the Oct. 14 upside reversal day as a potential entry point. That’s when Walgreens cleared a downward-sloping trendline. The stock also is trying to climb the right side of a consolidation that dates back to April.

Even though WBA stock is technically actionable at this time, investors should focus on stocks that have been trending higher with better track records of outperformance, which can be evidenced by strong Relative Strength lines and RS scores.

To find the best stocks to buy and watch, check out IBD’s Stock Lists page. More stock ideas can be found on our Leaderboard and MarketSmith platforms.

Follow Alexis Garcia on Twitter @IBD_Alexis for business news and more.


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