Sat. Jun 22nd, 2024

Pharmacy chain Walgreens Boots Alliance (WBA) was among the early leaders in the Dow Jones Industrial Average Monday after receiving an upgrade upon arrival of its new CEO. WBA stock surged premarket.




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JPMorgan upgraded WBA stock to an overweight rating from neutral early Monday as Tim Wentworth officially took over as CEO. The company announced Wentworth’s appointment on Oct. 11. He assumed the role Oct. 23.

“Today commences a new era” for WBA stock, JPMorgan analyst Lisa Gill wrote in a research note. Walgreens has an opportunity to rid itself of several weighing issues in the coming quarters and improve performance with a revamped, health care-focused management team and a “lowered but credible bar,” Gill wrote. She also expects the company’s cash flow to improve in fiscal 2024. JPMorgan lifted its price target on WBA stock to $30 from $27 — 41% above where shares finished Friday.

New Management

Wentworth had served as CEO of Express Scripts, a leading pharmacy benefits manager, starting in 2015, and during its $54 billion acquisition by Cigna Group (CI) in 2018. He was then appointed CEO of Evernorth, Cigna’s health services organization which partners with health plans, employers and government organizations, launched in 2020.

An announcement from Stefano Pessina, Walgreens executive chairman, pointed to Wentworth’s “profound expertise in the payer and pharmacy space as well as supply chain, IT and Human Resources.”

The Dow Jones stock is coming off its Q4 results from Oct. 12. Adjusted earnings fell 16% to 67 cents per share while revenue rose 8.7% to $35.42 billion. FactSet analysts expected earnings of 69 cents per share on $34.79 billion in sales.

Walgreens posted double-digit earnings declines in five of the past six quarters.

Walgreens guided full-year 2024 earnings to range between $3.20 and $3.50 per share adjusted, down from $3.98 for fiscal 2023. Wall Street forecasts FY24 earnings of $3.36 per share on 2.9% revenue growth to $143.07 billion.

Rival Bankruptcy

Elsewhere, rival drug chain Rite Aid (RADCQ) filed for Chapter 11 bankruptcy protections on Oct. 15. The company faces losses and lawsuits from the opioid epidemic, while the entire sector grapples with a host of factors, including rising competition from Walmart (WMT) and Amazon (AMZN).

The Justice Department sued Rite Aid in March, alleging the Philadelphia-based chain knowingly filled unlawful prescriptions for opioids and other controlled substances. Rite Aid denied wrongdoing and called the claims “hyperbolic,” and filed a motion to dismiss the lawsuit, the AP reported. The company claims it exceeded regulatory requirements for prescription controls.

Rite Aid also said it obtained $3.45 billion in financing from some of its lenders to support its bankruptcy process. The Chapter 11 filing in the U.S. Bankruptcy Court of New Jersey listed $7.6 billion in assets and $8.6 billion in total debts.

Last week, Rite Aid announced plans to close 154 of its approximately 2,300 stores in 10 states, the New York Times reported.

WBA Stock

WBA stock jumped 3.1% early Monday. Shares of the Dow Jones giant are trading near their lowest levels since 2009. Walgreens stock tumbled 41.8% so far this year.

The New York Stock Exchange delisted Rite Aid stock on Oct. 16 but it trades on OTC markets under the ticker RADCQ. Shares were little changed Monday, hovering around 27 cents per share. Rite Aid stock dove 92% in 2023.

Elsewhere, CVS Health (CVS) ticked higher Monday morning.

You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison

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