Pharmacy chain Walgreens Boots Alliance (WBA) emerged as one of the early leaders in the Dow Jones Industrial Average on Monday following an upgrade upon the appointment of its new CEO. WBA stock experienced a premarket surge.
JPMorgan upgraded WBA stock from a neutral rating to an overweight rating early Monday as Tim Wentworth officially assumed the role of CEO. Wentworth’s appointment was announced on Oct. 11, and he took on the role on Oct. 23.
In a research note, JPMorgan analyst Lisa Gill stated that “Today commences a new era” for WBA stock. She believes that Walgreens has the opportunity to address several issues in the coming quarters and improve performance with a renewed focus on healthcare and a strong management team. Gill also expects the company’s cash flow to improve in fiscal 2024. JPMorgan raised its price target on WBA stock to $30 from $27, reflecting a 41% increase compared to the previous closing price.
New Management
Wentworth previously served as the CEO of Express Scripts, a leading pharmacy benefits manager, from 2015 to 2018 when it was acquired by Cigna Group (CI). He then became the CEO of Evernorth, Cigna’s health services organization, which was launched in 2020 and collaborates with health plans, employers, and government organizations.
Stefano Pessina, Walgreens executive chairman, highlighted Wentworth’s expertise in the payer and pharmacy space, as well as in supply chain, IT, and Human Resources.
Walgreens recently released its Q4 results on Oct. 12. While adjusted earnings fell by 16% to 67 cents per share, revenue rose by 8.7% to $35.42 billion. FactSet analysts had anticipated earnings of 69 cents per share on $34.79 billion in sales.
The company has experienced double-digit declines in earnings in five of the past six quarters.
For the full year 2024, Walgreens expects adjusted earnings to range between $3.20 and $3.50 per share, down from $3.98 in fiscal 2023. Wall Street analysts forecast FY24 earnings of $3.36 per share, with a 2.9% growth in revenue to $143.07 billion.
Rival Bankruptcy
In contrast, rival drug chain Rite Aid (RADCQ) filed for Chapter 11 bankruptcy protections on Oct. 15. The company is facing losses and lawsuits related to the opioid epidemic, while the entire sector is grappling with various challenges, including increased competition from Walmart (WMT) and Amazon (AMZN).
In March, the Justice Department sued Rite Aid, alleging that the chain knowingly filled unlawful prescriptions for opioids and controlled substances. Rite Aid denied the allegations and referred to the claims as “hyperbolic.” The company filed a motion to dismiss the lawsuit. Rite Aid asserts that it exceeded the regulatory requirements for prescription controls.
Rite Aid secured $3.45 billion in financing from its lenders to support its bankruptcy process. The Chapter 11 filing listed $7.6 billion in assets and $8.6 billion in total debts in the U.S. Bankruptcy Court of New Jersey.
Last week, Rite Aid announced plans to close 154 of its approximately 2,300 stores in 10 states, according to the New York Times.
WBA Stock
WBA stock saw a 3.1% jump on Monday morning. The shares of this Dow Jones giant are currently trading near their lowest levels since 2009. Walgreens stock has declined by 41.8% so far this year.
Rite Aid stock was delisted from the New York Stock Exchange on Oct. 16, but it continues to trade on OTC markets under the ticker RADCQ. The shares had minimal changes on Monday, hovering around 27 cents per share. Rite Aid stock has plummeted by 92% in 2023.
In other news, CVS Health (CVS) experienced a slight increase on Monday morning.
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