Walgreens Stock Goes From Bad to Worse After Recent Earnings Report

Walgreens released disappointing Q1 earnings but management remains hopeful about the company’s future.

On Wednesday, Walgreens released its first-quarter earnings report, and the results were even worse than investors feared. The earnings report showed that the company fell short on its revenue and earnings. 

On its own, the earnings report might not seem so bad. But Walgreens was the worst-performing stock on the Dow Jones Industrial Average in 2019. The company lost 14% in 2019, while the index gained 23% overall.

Here is a closer look at the earnings report, and what Walgreen needs to do to turn things around.

Walgreens falls short during Q1

Shares of Walgreens sank after the company announced that it fell short on its first-quarter guidance. The company’s revenue rose 1.6% year over year to reach $34.3 billion. This wasn’t bad, but it fell slightly short of analyst estimates of $34.6 billion.

Walgreens’ adjusted earnings fell 6% year over year to reach $1.37. This fell short of analyst estimates of $1.41 per share. 

The one bright spot in the company’s earnings report is that it didn’t lower its full-year guidance. Walgreens CEO Stefano Pessina acknowledged that the company fell short this quarter, but expressed confidence in the coming year. 

Pessina assured investors that the company’s strategy would begin to pay off and “drive long-term sustainable growth going forward.”

Is a turnaround possible for Walgreens?

Few analysts have anything good to say about Walgreens stock. It’s considered a moderate sell on Wall Street, and a Wells Fargo Securities analyst recently downgraded the stock. The company’s poor performance has even led to buyout speculations, though it’s hard to see how this would play out. 

All in all, a turnaround is possible for Walgreens, though it doesn’t seem likely. The company continues to struggle in its international pharmacy business. And it’s U.S. retail sales have taken a hit after the company put limits on tobacco sales. 

But Walgreens’ U.S. retail business is still profitable. And it will be interesting to see how recent partnerships the company formed with Kroger and McKesson play out in the coming year.