What Does Walgreens Stock Have to Offer as Earnings Loom?

WBA has beat earnings expectations on all of its last four quarterly reports

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Walgreens Boots Alliance Inc (NASDAQ:WBA) is gearing up for its fiscal second-quarter earnings, due out before the open on Thursday, March 31. While WBA reported earnings of $1.68 per share last quarter, covering analysts anticipate that the company's EPS (earnings per share) will drop to $1.48 for the upcoming report. A look back at its last eight reports shows WBA settling higher after four of these session, and averaged a next-day move of 5.7%, regardless of direction.

WBA was last seen up 1.8% at $47.85, and yesterday the company announced it was partnering up with Laboratory Corp. of America (LH), otherwise known as LabCorp, to offer the latter's "Pixel by LabCorp COVID-19 at-home collection kit" free of charge. On the charts, the equity has staged a slow climb off its late-February rout, though it ran out of steam yesterday at the 30-day moving average, which is in the vicinity of the stock's year-over-year breakeven level. Year-to-date, WBA is down 8.5%. 

wba chart march 8

Analysts are still hesitant. Of the 10 in coverage, eight say "hold," and two say "sell" or worse. Meanwhile, the 12-month consensus price target of $53.55 is a relatively slim 11.7% premium to current levels. 

WBA offers a solid dividend yield of 4.06% with a forward dividend of $1.91. Walgreens stock also has an attractive valuation from a fundamental point of view, trading at a forward price-earnings ratio of 9.24 and a price-sales ratio of 0.30.

However, in terms of WBA's top- and bottom-line growth, the healthcare name has struggled to find consistency on an annual basis. Walgreens experienced a 5% drop in revenues for fiscal 2021 and a 91% decrease in net income between fiscal 2018 and fiscal 2020, after back-to-back years of bottom-line declines. Nonetheless, WBA’s revenues have held up strongly, and the healthcare company is estimated to see a 3.2% increase in revenues and a 2.2% increase in earnings for fiscal 2022.

Overall, Walgreens needs-based business model and WBA’s low valuation makes it and excellent option for dividend investors due to the high-dividend yield and a fairly decent possibility of long-term appreciation.


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