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Why Walgreens Boots Alliance stock is down today

Why Walgreens Boots Alliance stock is down today

Management continues to lower expectations.

Actions at the pharmacy Walgreens Boots Alliance (WBA -22.16%) fell as much as 25.4% in Thursday trading after reporting fiscal Q3 2024 results. Shares are still down 24.7% as of 3 p.m. ET.

Poorer than expected results

Management said revenue rose 2.6 percent to $36.4 billion and net income nearly tripled to $344 million, or $0.40 per share.

The big change was that full-year earnings estimates were cut from a range of $3.20 to $3.35 to a range of $2.80 to $2.95 per share. It’s the second time this year that the company has cut guidance.

Management said they will close some unprofitable stores and reject some products they consider to be too low-margin.

Stock value or trap value?

It’s easy to look at Walgreens today and see a stock of value. At the low end of guidance, the stock trades for just 4.2 times earnings. The problem is that the company’s margins are extremely thin and it is under pressure from suppliers and customers.

Management said consumer demand has been weak and shoplifting has increased, but the truth is that Walgreens is rarely a low-cost provider of consumer products, so it’s easy to see why sales aren’t growing as quickly as they should. one hopes. if consumers feel pinched by higher prices.

Given Walgreens’ declining business and the likelihood that it will shrink its footprint significantly, this looks more like a value trap than a great buy for investors. There’s only $8.9 billion in debt, but $21.4 billion in lease obligations hanging over the company, and that’s going to keep me out of the stock.

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.