Shares of Walgreens Boots Alliance Inc. (WBA) surged 3.1% in premarket trading on Thursday following the release of their fiscal first-quarter earnings report. The drugstore chain and healthcare services company reported better-than-expected results; however, they also announced a significant dividend cut to improve their cash position.
Strong Financial Performance
Walgreens reported a narrower net loss of $67 million, or 8 cents per share, for the quarter ended November 30th, compared to a loss of $3.72 billion, or $4.31 per share, in the same period last year. Adjusted earnings per share came in at 66 cents, surpassing the FactSet consensus estimate of 62 cents. Sales for the quarter reached $36.71 billion, marking a 10% increase from the previous year and exceeding the FactSet consensus of $34.95 billion. The growth was primarily driven by a 6.4% increase in retail pharmacy sales to $28.94 billion and a significant jump of 95.2% in U.S. healthcare sales to $1.93 billion.
Alongside their earnings report, Walgreens also announced a decrease in their quarterly dividend by 48%, from 48 cents per share to 25 cents per share. Prior to the cut, the company boasted the highest yield among Dow Jones Industrial Average components at 7.51%. Despite the reduction, the new annual dividend rate of 25 cents implies a yield of 3.91%, placing it sixth in the Dow.
Focus on Long-Term Shareholder Value
Walgreens is currently exploring various strategic options to enhance long-term shareholder value. The company aims to take swift actions to control costs, boost cash flow, and maintain a balanced approach to capital allocation priorities. Chief Executive Tim Wentworth expressed a commitment to these efforts, stating, "We are evaluating all strategic options to drive sustainable long-term shareholder value, focusing on swift actions to right-size costs and increase cash flow, with a balanced approach to capital allocation priorities."
Despite the dividend cut, Walgreens remains an attractive option for investors with a dividend yield still over double the implied yield for the S&P 500.