Walgreens Boots Alliance's (WBA) Q4 Setup 'Looks Challenging' - UBS

October 7, 2022 1:04 PM EDT
Get Alerts WBA Hot Sheet
Price: $41.50 --0%

Rating Summary:
    8 Buy, 23 Hold, 3 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 7 | Down: 16 | New: 20
Join SI Premium – FREE

Get inside Wall Street with StreetInsider Premium. Claim your 1-week free trial here.

In a note to investors on Friday, UBS analyst Kevin Caliendo cut the firm's price target on Walgreens Boots Alliance (NASDAQ: WBA) to $37 from $40, maintaining a Neutral rating, telling investors the setup for the fourth quarter looks challenging while uncertainty lingers over the company's 2023 numbers.

"WBA is set to report 4Q results on 10/13 alongside a two hour presentation, prompting intrigue into the company's agenda for FY23," wrote Caliendo. "Given the disconnect for FY23 EPS between investor expectations (range of $3.50-$4.40), consensus expectations ($4.58) and management's initial $5.00 target set last year, conviction around what WBA might say is limited."

UBS' new full-year 2023 estimate, which accounts for increased macro pressures, higher UK energy costs, and higher interest rates, is now $4.20, although UBS stated various scenarios could push earnings down below $3.80.

Furthermore, UBS estimated Walgreens Boots would need to repay more than $3.5B in debt in order to maintain its investment-grade credit rating.

"In our base case, we assume a sale of 10M ABC shares, which has a net dilutive effect of $0.08. The biggest risk to WBA stock is if management decides to cut its dividend (current yield 6%) which as we detail below, could occur if management decides it needs more capital to fulfill its growth strategy," Caliendo concluded.

By Sam Boughedda

Serious News for Serious Traders! Try Premium Free!

You May Also Be Interested In

Related Categories

Analyst Comments, Analyst EPS View, Analyst PT Change, Hot List

Related Entities

UBS, Earnings