Walgreens Earnings: Solid Start to 2025 and Early Green Shoots of Recovery Lift Shares

Key Morningstar Metrics for Walgreens Boots Alliance

• Fair Value Estimate: $20.00
• Morningstar Rating: ★★★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Walgreens Boots Alliance’s Earnings

Walgreens Boots Alliance WBA reported better-than-expected fiscal first-quarter results, marking a solid start to the fiscal year. Total sales of $39.5 billion were up 7.5% year on year, and all three segments delivered nice results. We maintain our fair value estimate of $20 per share and view the stock as undervalued.

US retail generated $30.1 billion in sales and was up 6.6%. We think this is an impressive result, given that a slow start to winter and colder months led to lower respiratory incidences and fewer store visits. Also, consumers are still cautious about where their dollars are going, despite rates and inflation trending downward, making the retail headwinds persist throughout the quarter. That said, the back end of the pharmacy proved resilient despite about 70 store closures in the quarter, and the firm grew comparable prescription volume and maintained its market share.

International and US healthcare started the year on strong footing, delivering double-digit gains. Boots continues to be a strong performer, both in retail and online sales, and VillageMD and Shields display solid growth with segment margins gaining traction.

Overall, the most recent results lifted shares, which are up over 20% at the time of writing, reflecting a much-needed stabilization for the firm. While neither the solid earnings nor the surging stock expedites our expected timeline for Walgreens’ turnaround, we think a continued execution of its footprint optimization plan and a more consistent readout of stable performance should continue to lift the depressed stock. After a long period of volatility, we think Walgreens still needs a few more quarters of good execution, but we believe patient long-term investors can realize the significant upside to our fair value estimate over the medium term.