Walgreens Earnings: Tough Year Finishes With Disappointing Results and Challenges Likely in 2024

No-moat Walgreens Boots Alliance reported weaker-than-expected fiscal fourth-quarter earnings, marking the end of a challenging year. Quarterly sales were up 9.2% year over year, but adjusted EPS of $0.67 fell 18% on constant currency. Walgreens continues to see headwinds in its overall business, including a normalization of respiratory events, lower COVID-19-related contributions (400,000 COVID-19 vaccinations administered in the fourth quarter versus 2.9 million in the prior-year quarter), labor pressures, shifting consumer behaviors, and a challenging macroeconomic environment. While year-over-year comparisons for 2024 appear likely to ease, these challenges may creep into next year, judging by the firm's adjusted 2024 EPS guidance of $3.20-$3.50 compared with 2023’s $3.98. After updating our model for these near-term headwinds, we expect to lower our fair value estimate by a mid-single-digit percentage.