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Buy Beaten-Down Walgreens (WBA) Stock Ahead of Earnings?

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Walgreens Boots Alliance (WBA - Free Report) reports its Q3 fiscal 2020 financial results before the opening bell on Thursday, July 9. The question is should investors consider buying shares of the struggling pharmacy chain?

Walgreens stock has taken a big hit over the last several years as Wall Street worries the pharmacy retailer will struggle down the road in a quickly changing retail environment. This includes Amazon’s (AMZN - Free Report) expanded pharmacy business, as well as Target (TGT - Free Report) and Walmart 's (WMT - Free Report) continued e-commerce growth. The company is also under pressure to diversify after the CVS and Aetna (CVS - Free Report) merger.

With this in mind, WBA shares are down 3% since March 23, while the S&P 500 surged over 40% and rival CVS jumped 20%. More broadly, Walgreens stock has fallen 45% over the last three years, as Wall Street worries about prescription drug delivery disruption, a possible lack of in-store foot traffic, and more.

 

 

 

 

 

 

 

 

WBA topped Q2 estimates for the period ended on Feb. 29, but it said that its U.S. store sales fell sharply in the last week of March, after an initial stockpiling surge. The pharmacy chain noted that it is diverting some funds for its restructuring plans to help with coronavirus-based costs.

Looking ahead, our Zacks estimates call for WBA’s adjusted Q3 earnings to fall 27% to $1.08 a share, on 1.7% lower revenue. This would mark its first year-over-year sales decline since the second quarter of 2017. Walgreens has also seen its earnings estimates trend lower over the last seven days, with Q3 down from $1.15 to $1.08 a share.

Walgreens is currently a Zacks Rank #4 (Sell), with an “F” grade for Momentum in our Style Scores system. Despite its strong dividend yield and beaten-down price point, investors likely want to stay away, at least until WBA stock shows some signs of a comeback.

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