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Walgreens’ stock jumps after earnings beat, dividend cut to boost cash flow

Shares of Walgreens Boots Alliance Inc. rallied Thursday after the drugstore chain and healthcare-services company beat fiscal first-quarter earnings expectations, and nearly halved its dividend to bolster its cash position.

The company said it lowered its quarterly dividend to 25 cents a share from 48 cents a share, with shareholders of record on Feb. 20 receiving the new dividend on March 12.

Before the dividend cut, Walgreens’ stock WBA, -4.05% was the highest-yielding Dow Jones Industrial Average DJIA component with a yield of 7.51%. At Wednesday’s stock closing price of $25.57, the new annual dividend rate implies a yield of 3.91%, which would be the sixth highest in the Dow, and is still more than double the implied yield for the S&P 500 SPX, -0.80% of 1.50%.

“This action reinforces our goal of increasing cash flow, while freeing up capital to invest in sustainable growth initiatives in our pharmacy and healthcare businesses, which we believe will ultimately improve shareholder value,” said Chief Executive Tim Wentworth.

The stock rose 1.1% in premarket trading. It had tumbled 30.1% in 2023 to be the Dow’s worst performer after falling 28.4% the year before.

Separately, the company reported net losses for the quarter to Nov. 30 that narrowed to $67 million, or 8 cents a share, from $3.72 billion, or $4.31 a share, in the same period a year ago.

Excluding nonrecurring items, such as charge for fair-value adjustments on financial derivatives in the latest quarter and charges on opioid-related claims last year, adjusted earnings per share fell to 66 cents from $1.16, but beat the FactSet consensus of 62 cents.

Sales grew 10% to $36.71 billion, above the FactSet consensus of $34.95 billion.

Among Walgreens business segments, retail pharmacy sales rose 6.4% to $28.94 billion and same-store sales increased 8.1%. Pharmacy sales were up 10.7%, boosted by higher prices on branded drugs, while retail sales fell 6.1% amid weaker consumer demand and a weaker flu season.

International sales jumped 12.4% to $5.8 billion, and U.S. healthcare sales jumped 95.2% to $1.93 billion.

“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,” said Chief Executive Tim Wentworth.

The stock has rallied 14.7% over the past three months, while the Dow has climbed 13%.

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